Surge in Multifamily Construction to Create Short-term Oversupply: CBRE
Originally published on March 9, 2023 by Michael Tucker for the Mortgage Banker's Association.
CBRE, Dallas, said delivery of a near-record 716,000 new multifamily units over the next two years will create a short-term oversupply, but noted the new supply will keep long-term fundamentals healthy.
In an Intelligent Investment report, CBRE said the construction surge could push the multifamily sector’s overall vacancy rate above equilibrium to a peak of 5.2% from 4.6% by year-end. “While this may be surprising, given the overall housing shortage in the U.S., the lack of supply is predominantly in single-family homes and not multifamily units,” the report said. “CBRE expects that demand for rental housing will gain momentum this year as vacancy peaks only slightly above its long run average.”
Despite a multifamily unit surplus over the short-term, CBRE forecasts the U.S. will need an additional 2.3 million new units to maintain healthy market fundamentals over the next 10 years. Once the largest portion of the delivery wave has concluded through 2024, the U.S. will still need nearly 200,000 additional units annually to maintain proper supply and demand balance, the report said.