Multi-family Over-saturation or Good Sign? How about Mixed Use?

[Jessica Zolotorofe]

Hi all! So, I just ready the Harvard University's recently released State of the Nations Housing Report, and looks like construction of multifamily units is at the highest level since the 1980s! Do you think that means that the market is becoming over-saturated, or is it a good sign that the demand is high and it means that there is great opportunity for developers in that market?

My personal opinion is that lifestyles are changing and people that previously preferred more rural or suburban living are moving to areas more densely populated where jobs are closer-by and more jobs are available. Also to a similar point, with time and efficiency being such huge parts of our lives this generation, living in places where multi-families are most popular, you usually get the benefit of retail and restaurants nearby. Plus, cost sharing on capital expenses like new roof, plumbing, etc. in the future seems to be desirable with the uncertainty of the economy. That being said, while it is definitely expanding quickly, I’m surprised the mixed use development market didn’t come in at a higher number. Could it be because of the extra challenges of financing and managing a mixed use project, or what might be some developers’ hesitation? There is certainly some significant upside to it.

As far as over-saturation, I’m just really not sure what the answer is. I live in Jersey City and the rate of new construction of high rises is crazy, and pricing is even crazier. So, seemingly, there is still great prospect, but I suppose time will tell. It will be interesting to see how well all of these thousands of new units rent or sell once they are completed.

I would never advise a client specifically to invest in commercial, mixed use or residential/multifamily, real estate in general is a great investment if you do it right, but I do like to be able to give some perspective as far as pros and cons of each.

So, what does everyone think?