JLL: Boston, Like U.S., Experiencing Pent-Up Demand in Multifamily Market
There is pent-up demand in fast-growing pockets of the U.S. multifamily sector, including the Greater Boston metro, according to a new report by Jones Lang LaSalle.
JLL is projecting Greater Boston will pick up 13,500 units in the next four years. The math works out to 3,375 units per year versus 5,000 units that delivered each year from 2004 to 2008. Less than 700 units came on line each year from 2009 through 2012.
“There is pent up demand from a development lull,” said Michael Coyne, JLL senior vice president and multifamily expert. "Downtown Boston is undergoing an exciting transformation as residential developers respond to strong demographics, exceptional fundamentals, and a new trend towards a live, work, play lifestyle." Also, household formation is on track to increase to 0.8 percent in the coming five years, up 0.3 percent from its historical norm.
Boston is reflecting the multifamily sector on a national basis. JLL is projecting 260,000 units will come on line, which is 12 percent below historical average delivery levels, according to Jubeen Vaghefi, international director and leader of JLL's multifamily capital markets.
JLL reports multifamily development nationwide hasn’t "skipped a beat," fuelled by Fannie Mae and Freddie Mac as a continued source of lending for the exit of development projects. Meanwhile, construction lenders have increased the supply line through favourable interest rates and attractive capital.
“Development activity continues to increase in most markets, with just over half (53 percent) reporting a substantial pickup in land acquisition, lining up financing, and getting building permits, though not yet much in the way of actual construction starts," reports the National Multi Housing Council.
Some metros, though, are lagging in development and desperately need more units on the ground. Of 28 metropolitan areas that were surveyed, JLL found nearly 70 percent will have triple or quadruple digit supply growth this year over 2012 levels. South Florida, Las Vegas, Phoenix, Chicago and Los Angeles will be some of the top markets for supply deliveries in 2013.
“While markets like South Florida will experience outsized deliveries in 2013, in reality, those numbers are a fraction of what we’ve seen in the past—just 40 percent of the historical annual average," Vaghefi said. "After several years of meager deliveries, the sector is finally starting to respond to demand in the marketplace. We’ve got a long way to go before we cross that ‘bubble’ threshold—this pipeline is in no danger of bursting."
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