What happens when you are faced with incredible demand and not enough supply?
- You have a market like what we have right now- rents rising faster then lease renewals can keep up with, and record low vacancy rates
- In the central PA region, the vacancy rate end of Q1 was 2.9%, barely enough to turn units
- In the central PA region, the rents are rising at 8.7% YOY
When you have demand like this, developers rise up to meet the demand with more supply.
We need more units to return to a healthy market. Here is where we are at on the development continuum:
- For 2022, we estimate we will need a minimum of 1,226 units. This is based on the expected population growth of renter households in Lancaster, York, Cumberland & Dauphin Counties.
- With the increase demand in the housing market for sale, this number will be pushed higher by residents who desire to purchase but cannot because of the shortage of supply, increasing prices and increasing interest rates.
- Currently in the pipeline, with projects that ROCK has tracked, there are 1,893 units coming on line within 2022/2023.
- This increase in supply will help to ease the record demand and bring it back to normalized market.
What does this mean for existing multifamily owners?
- Make your projections and expenses based on past 5 year averages, as a return to normal market equilibrium should be coming in the next few years.
- Your turn over rates will likely be higher than it has been the last few years, as more options available to tenants permit them to be more mobile and price sensitive
- Rising rents should stabilize to a standard deviation above/at the inflation level
Does this changing market give your heartburn? Rest assured it is part of a normal equilibrium:
For a comprehensive overview of the state of major markets around the country, head on over to IRR.com and sign up for their 2022 Viewpoint. The graph below is a glimpse into the insight of their summaries. Not surprising, most markets in the US are in the expansion continuum.
Visit our website for more recent local market reports here.
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