The commercial real estate firm CBRE predicts that Boston will be the “star performer” in the country’s multi-family market for 2020.
Even though the US rental long-term vacancy rate is set to rise to an average of 5.1% in 2020 as the economy softens, Boston’s vacancy rate is expected to rise to 4.5% from 2019’s vacancy rate of 4.3%. CBRE forecasts rental price growth to rise an average of +2.4%.
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“Buying or building in the suburbs will remain the best bet based on market performance as investment returns. Suburban multi-family will out perform urban (multi-family), maintaining lower vacancy and achieving higher rent growth,” stated the CBRE forecast for 2020.
Multi-family in Phoenix, Atlanta and Austin are also forecast to do well, according to CRBE. “Very high growth metros by population, household formation, and employment will drive multi-family demand. In Atlanta and Phoenix, development has not ramped up to levels that should cause any concerns,“ CRBE added.
In Q3 2019, seven smaller metros had +4% or higher rent growth. Such smaller metros include…
- Albuquerque NM
- Birmingham AL
- Colorado Springs CO
- Greensboro NC
- Memphis TN
- Dayton OH
- Tucson AZ
CRBE foresees all seven of these metros outperforming in 2020.
Meanwhile, rent control enacted in New York, California and Oregon will impact multi-family markets. CRBE believes Illinois and Washington may soon join this rent-controlled list of states.
CRBE indicated, “New rent regulations have been instituted in a few key markets and many more are being considered to alleviate rising rental housing costs. Housing economists are concerned that building more housing is a better response to the (affordability) problem rather than rent control but 2020 will bring more debate (to this issue), possibly more regulation and more unease for the industry.”
The US economy is expected to grow at a 2.1% rate, according to the Fannie Mae forecast in mid December 2019. The US economic growth rate in 2019 was 2.3%.
The unemployment rate, currently near 50-year lows, is likely to remain under 4% through 2020, also according to Fannie Mae. This level of unemployment rate supports consumer spending rates that account for approximately 70% of the nation’s GDP.
Thanks to HousingWire’s Kathleen Howley for source data.
Also read: New Home Sales to Rise to 13-Year High in 2020 Market Needs More Than Low Mortgage Rates(, Big Housing Story of Decade – The Growth of Renting
