Rise of the Giants: America's Apartment Buildings are getting Bigger and Taller
In recent years, the rental apartment market in the United States has seen a significant surge in new developments, surpassing levels not seen since the 1980s. One of the key drivers behind this trend is the emergence of larger and taller apartment buildings that are reshaping urban landscapes across the country.
Apartment developers are capitalizing on this trend by creating towering properties with an increased number of units. This shift has been facilitated by the willingness of some local officials to relax zoning and other regulations, as well as the growing interest of institutional investors in smaller cities. These factors have enabled developers to embark on projects of unprecedented scale.
According to property data firm Yardi, between 2021 and 2023, U.S. cities added over 2,900 buildings with more than 200 apartment units, marking a 17% increase compared to the preceding period from 2018 to 2020. This surge has outpaced the growth in smaller properties with at least 50 units.
Traditionally, office towers have dominated American skylines. However, there has been a noticeable shift as builders now focus on elevating apartments into the clouds. High-rise apartments, which accounted for just 2% of new supply during the 1990s, surged to 14% in 2022, reflecting a significant change in architectural preferences.
Examples of this trend can be seen in cities like Milwaukee and Atlanta. Milwaukee is set to unveil its tallest-ever rental tower, standing at approximately 530 feet, while Atlanta is witnessing the construction of a 60-story rental apartment and office building, which will be the city's tallest tower in over three decades.
The shift towards larger and taller apartment buildings is driven by several factors:
Rising construction costs have compelled developers to build more units to ensure profitability. This has led to a reduction in the average square footage of new apartment units, reflecting a 6% decrease from 2013 to 2022.
The scarcity of available land has contributed to the proliferation of taller buildings. In cities like Dallas, where large parcels of land are scarce, developers are building upward on smaller lots, leading to the emergence of impressive residential towers.
Despite the slowdown in rent growth in many parts of the country, the demand for multifamily developments remains robust. Factors such as record home prices, limited inventory, and high mortgage rates are driving relatively high earners to opt for rentals.
Developers are also leveraging amenities to attract tenants. Projects like The Couture in Milwaukee boast a range of amenities, including outdoor pools, gyms, lounges, and dog parks, catering to the evolving preferences of urban dwellers.
In conclusion, the trend towards bigger and taller rental apartment buildings reflects the dynamic nature of the real estate market, driven by economic factors, evolving consumer preferences, and regulatory changes that are reshaping urban living experiences across America.
What are your thoughts on bigger and taller apartment buildings in America?
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