Rental units made up 95.2% of all multifamily construction starts for the second quarter of this year, a likely response to the shifting demand toward suburban markets, says the National Association of Home Builders. Condo and for-sale multifamily starts have dropped during the past year, lower than already low levels. For rental unit construction, the lowest share of total multifamily starts was in 2005 when rentals made up 47% of multifamily starts during the third quarter. Rental unit share remained about 80% between 1980 to 2002.
An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to second quarter 2021 data, the average square footage of multifamily construction starts declined to 1,045, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was just 990 square feet.
Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the second quarter of 2020, the one-year moving average for multifamily size was 1,058 square feet, while the median was 1,012. These measures are at more than two-decade lows. However, our forecast is for size to increase as multifamily building moves further out from urban cores as renters seek larger, more affordable housing due to the virus crisis.