Lessors of Residential Buildings NAICS 531110

Jul 16, 2025 - More Multifamily Development Outside Major Metros

• Apartment construction is increasingly shifting away from dense urban centers toward less populated and more affordable regions, according to the NAHB’s Q1 2025 Home Building Geography Index and reporting by Smart Cities Dive. Since 2016, large metro core counties have seen a 9.6 percentage-point drop in market share for apartment starts, hitting a low of 35.5%. The trend is fueled by affordability concerns, demographic shifts—especially the rise of older renters seeking suburban lifestyles—and project owners favoring lower-cost developments in exurbs and rural areas. Developers are pursuing projects farther out where land is cheaper and expansion is easier, though total activity in these areas remains relatively small.
• High home prices and mortgage rates have priced many would-be homebuyers out of the market, creating robust pent-up demand that’s unlikely to be realized in the near term, according to The Wall Street Journal. In 2024, there were about 1.1 million first-time buyers, compared to an annual average of about 2.1 million over the last 20 years, according to the National Association of Realtors (NAR). To afford a median-priced new home today, a buyer would need an income of $127,000 compared to $79,000 for the same home in 2021, according to Harvard’s Joint Center for Housing Studies. The lack of affordability and the drop in first-time buyers have pushed the number of renter households to a record 46 million.

• Amid increased conversions and demolitions, the US supply of office space is on pace to shrink this year for the first time in 25 years, according to real estate services firm CBRE and reporting by The Wall Street Journal. The shift marks a break in a years-long office space glut as federal tax breaks, low interest rates, and unprofitable start-ups fueled office overdevelopment. Matters were made worse as the pandemic reduced demand further. Converting unused offices into residential space seemed like an obvious solution, but until recently, such projects were unprofitable. However, lower property values, local government incentives, and zoning law changes are making conversions practical.
• So-called “missing middle” medium-density housing, which includes duplexes, townhouses, and other smaller multifamily properties, has gained in popularity over the last several quarters, according to the National Association of Home Builders. Multifamily properties in the missing middle (2 to 4 units) have generally been out of favor since the Great Recession, but they are experiencing a resurgence. In the first quarter of 2025, there were 5,000 construction starts for housing properties with 2 to 4 units, which was flat compared to a year earlier. However, over the past four quarters, the number of missing middle residential construction units reached 23,000, marking a 53% increase over the four quarters before that period. The missing middle segment’s gains may be limited absent zoning reform that allows for increased density.