Although global growth is on pace to slow a bit in 2019, the multifamily market is expected to retain its strength—made possible in large part by advancements in technology, sustainable building practices, and a renewed focus on “lifestyle” communities. Read on to learn about five key trends you can expect in the multifamily market during 2019.
Continued Expansion of Lifestyle Communities
Property developers are constantly looking for ways to meet the needs and tastes of an ever-changing population base. One solution, the lifestyle community, has attracted millennials and empty-nesters alike. Baby Boomers are retiring in record numbers, and many have spent years looking forward to a carefree retirement lifestyle that doesn’t include home repairs and maintenance. Meanwhile, millennials favor living situations that provide social engagement, high-end features, and affordability. As a result, lifestyle communities—apartments with community amenities in shared spaces, high-tech unit features like USB ports and smart thermostats, and major curb appeal—continue to enjoy new growth.
A Slowdown in New Unit Construction
With a slight increase in the overall cost of materials and labor over the last few years, the completion of newly constructed multifamily units slowed slightly in 2018, down from a record high in 2017. This trend seems likely to continue in 2019 and beyond, with a cooldown in construction expected for the next few years. Fortunately, it’s not necessarily a bad thing—the market remains strong and slower construction rates now may actually be more sustainable in the long run by allowing for greater rates of unit absorption.
Property technology, or PropTech, continues to expand into just about every segment of the real estate market. PropTech investment topped $5 billion in 2018, with that figure only expected to grow in 2019. From land analyzation tools that allow developers to determine the best use for land to property management apps that can automate common tasks to title companies that rely on blockchain technology to transparently close new deals, today’s property owners, investors, and renters have a new world of opportunity literally at their fingertips.
The Affordable Housing Conversation
San Francisco recently made headlines when the average rent for a one-bedroom apartment hit $3,500 per month. However, the Golden Gate City isn’t the only part of the country with an affordable housing crisis. In fact, more than half of all U.S. renters pay 30 percent or more of their income toward rent, leading a greater number of politicians to include housing affordability issues into their 2019 platform. Real estate investors will be the first to feel the effects, both positive and negative, of any housing affordability decision, so it is important to be involved in the conversation.
Slower Rent Growth
In 2018, rents continued their steady uptick at a rate of around 3 percent. For 2019, this rate is predicted to continue at a slightly slower pace—2.5 percent—with a further slowing in 2020 and beyond. This slower rate of growth is an unsurprising development as we reach later into our current economic cycle, but signals to real estate investors to keep their fingers firmly on the pulse of the market.