As Apartment Construction Surges, will Multifamily Product in Pittsburgh Outpace Demand?
- May 26, 2015
Pittsburgh will continue to witness a surge in apartment construction this year, amid moderate payroll gains and rising home prices.
Research data from Marcus & Millichap shows that the metro’s employment—driven by the education, medicine, technology and energy sectors—will grow by 9,500 new positions in 2015, a slight increase from the 8,000 jobs added in 2014. However, this uptick will lag the national average for the fifth consecutive year.
Meanwhile, developers are expected to bring 1,900 apartments online this year, expanding inventory by 1.4 percent. This is slightly less than the amount of new additions recorded in 2014, when the rental construction cycle in Pittsburgh hit a peak with the completion of 2,200 units.
Demand for multifamily projects will be sustained mostly by young professionals and empty nesters looking to rent newly built apartments in desirable neighborhoods, despite the fact that renting is less affordable than monthly mortgage payments on a median-priced home.
Apartment deliveries will surpass demand and put upward pressure on vacancy, which is estimated to rise by 70 basis points to 5.0 percent this year. As a result, Pittsburgh reached the 39th position in the 2015 NAI ranking, down seven spots from last year, when vacancy increased by 20 basis points.
Following a 2.0 percent gain in 2014, effective rents this year will climb 3.7 percent to $1,050 per month.
As for investment opportunities, well-located assets such as those in the East End, South Side and North Hills will attract out-of-state buyers in search of properties that trade at prices below what is available in their home markets. Local investors will also compete for these high-yield assets, boosting deal flow in 2015.
Charts courtesy of Marcus & Millichap