Multi-family expands again in '98, but to ease in '99
By DARYL DELANO -- Industrial Distribution, 3/1/1999
Somewhat overlooked in all of the discussion about what an outstanding year the single-family home construction and sales markets had last year, is the fact that the multi-family sector enjoyed a fairly good 1998 as well. Although the numbers weren't quite on par with the breathtaking gains in the single-family market -- and were showing signs of losing steam at the end of the year -- the multi-family sector expanded impressively last year.Through the first 10 months of 1998, total spending on the construction of residential buildings with two or more units was running 7.9% ahead of the 1997 pace. During 1997, multi-family construction had grown by 11.4% from the 1996 level. The market was cooling as the year drew to a close, however, partly because of rising apartment vacancy rates in many parts of the nation -- a sure sign of overbuilding of multifamily units in some metropolitan areas, despite continued good growth in demand.
Construction work in this sector was also easing, though, because money for multi-family residential development wasn't as readily available in the wake of the early-fall financial market scare.
It was difficult to fully document that a dreaded "credit crunch" had materialized, but it was clear that financial institutions became much more risk averse when the full impact of economic problems in Asia, Latin America, and Russia became apparent.
This shouldn't present a major roadblock for justifiable new development this year, but the multi-family market will undoubtedly fall back a bit in many parts of the nation. With the slowdown at year-end 1998, it appears that total 1998 spending for multi-family construction grew about 5.7% -- exactly half the 1997 gain of 11.4%.
The total number of new units started (approximately 346,000) in multi-family buildings grew by an estimated 1.7% during 1998, following a 7.7% increase during 1997. This year, we're forecasting that multi-family spending will ease by 6.7% and that the number of new units developed in 1999 will fall about 6% short of the 1998 total.
Of the approximately 293,000 new units in multi-family buildings for which permits were issued through the first 10 months of last year, fully 15% were for buildings in Texas.
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