A number of factors have contributed to making multifamily the hottest commercial real estate asset in the U.S. over the past few years. A chronic lack of housing combined with steadily rising rents and declining vacancy rates have more investors and developers targeting the sector.

As rising interest rates and inflation make it more expensive to purchase homes, the national demand for rental housing is expected to remain strong for the foreseeable future. To capture this demand, multifamily owners and developers must focus on delivering properties that cater to evolving consumer preferences.

However, recent development trends suggest that the needs and preferences of the market's biggest renter cohort — aging millennials — are not being considered in critical design decisions. As a result, more product is being delivered that is unsuited to renter needs, creating a supply and demand imbalance.

Evolving Housing Preferences and Development Trends

With more than 72 million members, millennials (ages 26 to 41) are the largest age group in the country. Many millennials are finally entering the stage of life where they are forming and growing families, maturing in career positions, and building wealth. This has historically been a catalyst for evolving housing preferences, including single-family homes in more suburban environments.