New multifamily construction is gaining strength in the US. According to the National Association of Home Builders, housing starts for multifamily projects of five or more units increased by 28.1% in May 2023, the largest percentage gain since October 2016. This was the highest level of multifamily construction starts since April 2022.
Photo courtesy of VBC
There are a number of factors driving this increase in multifamily construction. One factor is the strong demand for rental housing. The US Census Bureau reported that the number of renter households increased by 1.4 million in the year ending March 2023. This is the largest annual increase in renter households since 1990.
Another factor driving multifamily construction is the tight supply of housing. The National Association of Realtors estimates that there is a shortage of 6.5 million homes in the US. This shortage is particularly acute in multifamily housing.
Even with the strong demand and tight supply, there are some headwinds facing multifamily construction. One headwind is rising construction costs. The cost of building materials has increased significantly in recent months, making it more expensive to build new apartments.
Another headwind is the rising interest rates. Higher interest rates make it more expensive to borrow money to finance multifamily construction projects.
Despite these headwinds, most economists expect multifamily construction to remain strong in the coming months and years. The strong demand for rental housing and the tight supply of housing are likely to continue to support multifamily construction activity.
According to the Modular Building Institute, the multifamily market remains the fastest-growing segment in the modular construction industry. The sector took up about 23% of the commercial modular output last year, according to the MBI report.
However, it is difficult to say exactly how many new multifamily projects are using modular or offsite construction. This is because there is no single source of data that tracks this information. However, based on anecdotal evidence and industry reports, it is clear that the number of modular and offsite multifamily projects is growing rapidly.
For example, a 2022 report by McKinsey & Company found that the modular construction market is expected to grow from $100 billion in 2022 to $250 billion by 2030. The report also found that the multifamily market is expected to be the fastest-growing segment of the modular construction market.
In addition, a recent article in the Construction Dive newsletter reported that the number of modular multifamily projects in the US is expected to double in the next two years.
While it is difficult to provide an exact number, it is clear that modular and offsite construction is becoming increasingly popular for multifamily projects.
Top picture courtesy of Rise Modular
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Gary Fleisher, the Modcoach, author
