Multifamily Construction sets record for 2021

Multifamily Sees Record Demand in 2021

CBRE: Total investment volume reaches $335 billion last year.

By Christine Serlin

Adobe Stock

2021 was a record-breaking year for the multifamily industry, according to a new report from CBRE. Total investment volume for the fourth quarter was $148.9 billion, a 73% quarter-over-quarter increase. This brought the year’s total to $335.3 billion, nearly double 2019’s previous record of $193.1 billion.

The market also set an annual absorption record of 617,500 units, up by 238% from 2020 and 97% from 2019 as well as 58% higher than the previous record of 390,000 units in 2000. Absorption measures the net amount of square footage either leased or vacated, with a positive reading meaning that more space was newly leased than vacated.

The CBRE findings show that last year’s performance signals a rebound for the industry, which was challenged by the pandemic in 2020 following a strong 2019.

“The 2021 multifamily market was extraordinary, by any measure,” said Brian McAuliffe, president of multifamily capital markets for CBRE. “We expect the ongoing economic recovery, job creation, wage growth, and household formation to support continued strong multifamily demand in 2022.”

The overall national vacancy rate fell to a record-low 2.5%. According to CBRE, on an annual basis, Class A multifamily had the biggest decline in vacancy, -2.8 percentage points. This is largely attributed to renters returning to urban submarkets in the second half of the year.

The average net effective rent rose by 13.4%. All 69 markets that CBRE tracks experienced positive rent growth last year, reaching double digits in 49 markets. According to CBRE, average rents exceed their pre-pandemic levels in all but three markets that the firm tracks.

In addition, new multifamily construction deliveries ended the year at 274,500 units. However, with a pipeline of more than 400,000 units under construction, CBRE forecasts deliveries this year to eclipse 2021.