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Multifamily Moves the Market Forward

Posted in Builders

Multifamily Moves the Market Forward

Builders of traditional single-family homes may find this trend baffling. But from a big-picture standpoint, the rise of multifamily makes sense. The term itself covers a wide variety of housing, including apartments, attached homes, condos, co-ops, duplexes, government-sponsored housing, mixed-use developments, military housing, student housing, and planned communities. Residents choose multifamily options for an equally diverse range of reasons, including environmental consciousness, amenities and convenience, concerns about the stability of the housing market, the desire for the mobility to pursue new careers, the arrival of retirement, and many more.

The industry as a whole has suffered during the recent recession, but the National Association of Home Builders (NAHB) has forecasted a steady rise in multifamily housing starts this year, continuing through 2012.

“Multifamily is the premier growth segment in the housing industry right now,” said Sharon Dworkin Bell, senior vice president for multifamily and 50+ housing at the NAHB. “There is a large demand for apartments and not enough supply, since developers are just starting to build again after a hiatus the last few years. In fact, we foresee a supply/demand imbalance in the multifamily sector for the next few years.”

With the predicted rise in new multifamily construction, builders are faced with an array of challenges, from highly involved, multiple-unit and multiple-story designs to sophisticated structural issues and complex fire codes. As with any project, proper planning, the right materials and efficient crews are essential elements of success.

“During the last cycle, rental housing offered a high degree of features and amenities both within the units themselves as well as in the common areas of the apartment community. While renters have come to expect that lifestyle, their ability to pay for it is now diminished. The challenge, therefore, is to find new ways of designing and constructing apartments at lower cost in order to continue to deliver the standard of living to which our residents have become accustomed,” Bell said.

“There’s no doubt that multifamily puts unique demands on builders, crews and materials,” said Rusty Carroll, director of corporate marketing for LP Building Products. “As a manufacturer, we’re set up to help our customers meet these demands. Our team has the capability to work with our customers through all phases of the multifamily construction process.”

Carroll clicked off a long list of materials manufactured by LP Building Products that are ideal for multifamily construction. He mentioned an array of LP® SolidStart® Engineered Wood Products before moving on to LP® TopNotch® 250, 350 and 450 OSB Sub-Flooring, LP® TechShield® Radiant Barrier Sheathing, LP® FlameBlock® Fire-Rated OSB Sheathing, LP® SmartSide® Trim & Siding products, and the CarraraStucco™ built on LP® SmartSide® substrate. “And let’s not forgot our original LP® OSB sheathing,” he added. “That’s a real workhorse.”

The architectural firm of Grimm + Parker, headquartered in Calverton, Maryland, recently completed The Varsity at College Park, a complex of apartments, retail stores and parking. Installing one layer of LP FlameBlock Sheathing to meet a two-hour rating in the exterior wall proved more cost effective than installation of separate layers of structural panel and exterior gypsum. Structural performance and ease of installation were also factors in the decision. Project manager Vinay Ganeshan was pleased with the results. “Whenever we need a two-hour wall, we’ll use this product,” he commented.

Environmental concerns are becoming more important in all aspects of building. And new military housing and government-sponsored housing energy regulations make LP TechShield Radiant Barrier Sheathing an increasingly good choice for the multifamily market.

Crosland Contractors of Durham, North Carolina, recently completed a 347-room luxury apartment complex near Duke University. One of their goals was to market energy savings to prospective renters. LP TechShield Sheathing was a key part of their plan. Project manager Chad Collins said, “People are excited about energy savings today…We installed LP TechShield Sheathing to help create the most efficient envelope possible for LEED Silver certification.”

As LP TechShield Sheathing can help builders meet housing energy certification, the strengths of LP SolidStart Engineered Wood Products shine in multifamily framing applications. LP SolidStart Rim Board products are high in strength and low in shrinkage, making them effective for high vertical and lateral wall load applications typically associated with multifamily construction.

Although the benefits of materials such as LP TechShield Sheathing or LP SolidStart Rim Board are typically hidden from view in a finished structure, exterior appeal is a must for homes of all kinds.

Jennifer Jenkins, multifamily segment manager, LP Siding Division, is quick to point out the beauty, durability, consistency and practicality of LP SmartSide Trim & Siding products. “Siding has to look great. That’s a given with us,” said Jenkins. “LP SmartSide products give you the beauty, variety and workability of wood without many of the headaches.”

Product durability is a major asset. “Our product line is so strong and durable, and builders really appreciate the peace of mind. With all of the lap, trim, panel, fascia and soffit products backed by an industry leading warranty, builders know they can rely on one of the most trusted names in engineered wood siding,” Jenkins says.

Studio E Architects, an award-winning architectural firm based in San Diego, California, is at work on a 50-unit affordable housing development, Riverwalk, which is being constructed on a sliver parcel in south San Diego. Studio E has incorporated LP SmartSide Siding on this multifamily project and has seen the benefits of engineered wood firsthand. They commented in their blog about how the performance of LP SmartSide is a big plus. “SmartSide is a new product for us. It’s a little thicker and easier to cut than fiber cement fiber lap siding that we have used before.”

As builders encounter the unique demands of multifamily construction, many are feeling optimistic for this sector of the industry. The NAHB Multifamily Production Index (MPI) and Multifamily Vacancy Index (MVI), which have served as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, have indicated a return to healthy market conditions for the multifamily sector. And because these numbers have historically provided information on the likely movement in the Census figures one to three quarters in advance, that’s good news for multifamily builders.

“The renewed optimism evident in this index indicates that developers are beginning to increase production in order to meet pent-up demand,” NAHB chief economist David Crowe said in a recent press release.

The MPI, which tracks developer opinion about new multifamily construction on a 1 to 100 scale, is at 40.8, the highest it’s been since the fourth quarter of 2006. The section of the MPI tracking perception of market rental properties is at 51.7; this is the first time this component of the index has gone above 50 since the second quarter of 2007. The MVI has declined to 33.3, representing the smallest figure since quarter three of 2006.

A recent study by McGraw-Hill Construction reflects this optimism with a strengthening in the multifamily side of the market.

“Multifamily housing is turning out to be one of the few near-term bright spots for the construction industry. While rising from a very low amount, multifamily housing in 2010 grew 12 percent in dollar terms, faster than the 6 percent gain reported for single-family housing, and it’s expected to see another double-digit increase in 2011,” said Robert A. Murray, vice president of economic affairs for McGraw-Hill Construction, in the report.

The NAHB has forecasted the construction of 133,000 new multifamily residences in 2011, but the association is concerned that the forecasted number is short of the 250,000 to 300,000 units needed to keep the supply and demand in balance. According to the NAHB, the capital needed to finance such construction is not available to developers. But the association is working with Congress to address key legislative elements critical to help ensure adequate credit availability.

Even with the forecasted increases in the multifamily sector, housing starts are fewer and competition for jobs is fiercer than at any other time in recent history. Smart builders will make the most of the opportunities in multifamily and the engineered wood materials created by LP Building Products.

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