7.15.15: Apartment Construction Is Booming

When Jess Eymann moved to Denver fresh out of college she considered buying a condo, but ultimately decided to rent an apartment instead. “There’s just not a lot out there to buy. Properties that I looked at weren’t really what I was looking for,” she said. Eymann’s decision to rent instead of buy mirrors a nationwide trend that is fueling a cross-country boom in apartment living.

The apartment industry as a whole contributed $1.3 trillion to the U.S. economy in 2013, along with more than 12 million jobs, according to a recent study conducted by economist Stephen S. Fuller of George Mason University’s Center for Regional Analysis for the National Multifamily Housing Council and the National Apartment Association.

Nationwide vacancy in the second quarter of 2015 has held at 4.2% for six quarters and appears to have bottomed out, said Ryan Severino, senior economist and director of research at Reis, a commercial real estate market service. This is their lowest point in two decades.

The low vacancy rate has led to sky-high rents and an explosion of apartment construction that so far cannot keep pace with demand.

“Developers are really building apartments about as fast as they can,” according to Cary Bruteig, owner of Denver-based Apartment Appraisers and Consultants. “There are so many properties under construction that the shortage of labor is preventing the completions from occurring as fast as they normally would.”

The surge in apartment living coincides with the drop in home ownership in America. In the final quarter of 2014, home ownership dropped to the lowest rate, 63.9%, in 20 years. With home construction lagging, apartment building is taking its place as a leading economic driver, according to Fuller’s study. It found that the economies of 17 major metropolitan areas across the country each received between $1 billion and $5 billion from apartment construction in 2013 alone.

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