Report Sees Greater South Atlantic Development Opportunity
- Jun 04, 2012
Cherry Hill, N.J.—Construction activity slumped markedly during the recession, resulting in good near-term opportunity for increased building of multifamily housing in every state. Longer term, there will likely be greater opportunity for multifamily development in South Atlantic states, as compared to the Northeast.
These are among key findings of a research report, released by TD Economics, an affiliate of TD Bank, which focused on the U.S. multifamily housing market. The bank, which has locations along much of the Eastern Seaboard, provides regional analysis of East Coast markets of greatest interest to bank clients who are developers of multifamily housing.
“I’ve been collecting, examining and analyzing data for the past two months,” the bank’s Toronto-based economist Alistair Bentley tells MHN. “In terms of the data examined, we relied on the American Community Survey (ACS), a survey of national housing inventory taken at the state and local levels, giving data on vacancy rates and housing characteristics, such as number of homeowners versus renters living in single-family and multifamily dwellings.”
After assessing housing markets in different states, Bentley and colleagues began examining demographics, to determine where future demand growth might exist. “One of our report’s key findings was there will be more demand for multifamily construction in the South Atlantic in the coming years,” Bentley says.
“That’s because the underlying pace of household formation in Georgia, Florida, both Carolinas, and even Virginia and Maryland to some extent, will outpace household formation in the Northeast,” he adds.
The TD Economics analysts examined housing construction activity before the recession began, finding construction in the South Atlantic was, Bentley says, “frothier” than in Northeast at that time. “But if we break down the types of construction activity, between multifamily and single family, we find the pre-recession building excesses were concentrated in single family in the South Atlantic, but concentrated in multifamily in the Northeast,” he adds.
The South Atlantic’s more severe economic contraction during the recession led to a more significant reduction in multifamily investment than in the Northeast. This led to an even greater supply gap, the report found. In sum, the South Atlantic region has less multifamily capacity to absorb during the recovery.
The takeaway? “Despite the foreclosure problems, there is a lot of opportunity in the South Atlantic for multifamily developers,” Bentley says. “The supply dynamics appear to favor the South Atlantic.”
Breaking his analysis down by states, Bentley noted that the swiftly growing states of Florida and Georgia will provide greater opportunity for developers than more established markets such as Maryland and Virginia.
Years from now some markets, especially in the Northeast, may become saturated with too many units of multifamily housing, Bentley warns. For this reason, the TD Economics report provides state level forecasts of sustainable investment trends across America’s East Coast.