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When American Assets Trust‘s superblock development in the Lloyd District opens in summer 2015, it will inject 657 residential units into the Portland housing market in one fell swoop. From an inventory standpoint, it’s enough to make any apartment broker or developer squeamish.

“You really have to look at when (the units) are going to be delivered,” said Gail Neuburg, a partner at ARA Real Estate Investment Services. “Is it even flow, or will it be crash, boom, bang – a huge amount at the same time? That Lloyd Center project, it really worries me because the size of it coming on is like three years of absorption.”

Despite a surge of multifamily development over the past several years, experts say the Portland market is poised for another. Some professionals are worried about oversaturation, but as roommates seek their own places, incomes rise and the population grows, demographic data suggests Portland will ultimately absorb those new units, and then some.

Indeed, the entire nation is expected to experience unprecedented demand for multifamily housing.

“This is not something that’s hypothetical or theoretical, or just something that’s coming out of a model,” said Calvin Schnure, an economist and vice president for research and industry information for the National Association of Real Estate Investment Trusts (NAREIT), a worldwide trade organization. “We have lots of evidence that people are doubled up … it’s a huge number – it’s an unprecedentedly huge number.”

Debunking the recession

Following the 2008 housing crisis, millions of households across the nation disappeared as people bunked under the same roof to save money. Graduating college students moved home. Young professionals found roommates.

More than 4 million people are doubled up and waiting to enter the housing market, according to NAREIT estimates. During the recession, the number of “shared households” rose 9 percent in Portland and 11 percent nationwide, according to the U.S. Census Bureau’s American Community Survey.

Schnure said two activities will temper demand for apartments moving forward – but not by much.

One is the recovery of the single-family housing market. In February, Portland median home prices were up nearly 15 percent from a year previous, while closed sales were up 6.6 percent, according to the latest report from the Regional Multiple Listing Service.

A second key factor is competition from new apartments – more units means more choices for cost-conscious tenants. In 2013, construction permits were issued for 5,800 new units in the four-county (including Clark County in Washington) metro area – 2,700 more than in 2012, according to Barry & Associates.

The company estimates that 10,000 to 14,000 additional units will come online over the next two years. But Schnure is telling investors not to worry – renters are out there, even if owners can’t see them.

“The pent-up demand is bigger than the move-out market, and bigger than new supply coming online,” he said. “(The renters are) not on the multifamily owner’s radar screen because they’re not showing up at open houses to rent. They’re showing up at job fairs looking for a job. You’re not going to see this demand until the job market gains strength, and we’re starting to see signs that it will.”

Money to burn

Between 2012 and 2022, Oregon is expected to add 258,000 jobs – a 15 percent increase, according to the state Employment Department. In addition, 392,000 jobs are expected to become available over the same time period as workers change occupations or retire.

The employment department also anticipates significant growth of high-wage jobs in the high-tech industry (at an average annual salary of $94,000).

“Population growth is one of the most important factors, but the economic health of that population is probably just as important,” said Sam Rodriguez, managing director of Mill Creek Residential Trust‘s Oregon office. “I have two kids, and if my kids were in their twenties and they couldn’t find a job, they’d be living at home.”

Mill Creek has several, hundred-plus-unit apartment developments under construction in the Portland metropolitan area, and at least two more on tap. As a merchant builder, the company looks for projects with room for rent growth so investors can maximize yields. However, those yields are becoming more elusive.

Rents grew 8.1 percent in Portland last year (ranking top five in the country), but Ira Virden, a director at HFF, said Portland apartments are still 10 to 25 percent cheaper than those in other major markets. That’s attracting young affluent professionals … and real estate investors.

In December, Mill Creek sold the 179-unit Savier Street Flats for $64.1 million. Nineteen other institutional-size apartment acquisitions – ranging from $10.4 million to $95.8 million – took place in the Portland-metro region last year, according to HFF. Virden added that Unico Properties recently put the Asa Flats in the Pearl District up for sale.

“I think we definitely have a couple years of steady growth (left) in my opinion,” Rodriguez said. “Maybe even three, depending on interest rates, the overall economy and income growth.”

Population rising

Despite an apparent boom in apartment development over the past few years, the level of construction would barely keep pace with population growth projections over the next 20 years.

By 2035, Portland alone is expected to grow by 205,594 people – roughly 8,224 people per year. Assuming that 39 percent of those residents opt for single-family homes (based on projections by Metro), the region would still need approximately 2,500 to 5,000 new apartment units annually — depending on household size. Metro predicts that by 2040, multifamily housing will account for 85 percent of new construction; right now it’s 61 percent. Last year, for the first time in Portland’s history, the number of multifamily permits equaled the number for single-family homes.

The region is also playing catch-up.

“Historically, we average about 4,000 units a year, and so the past three to four years we didn’t get anywhere near that,” said Brian Glanville, senior managing director for Integra Realty Resources in Portland. “And so we’re really making up for lost ground now … and if you provide for the projection of one million people coming to Portland (in the greater seven-county area), that’s about 50,000 a year, and you have to put them someplace.”

Patrick Barry, an appraiser at Barry & Associates, said he has heard concerns about oversaturation. Like Neuburg, he wonders how deep renters’ pockets are in Portland, and thinks increased competition could pose challenges for some building owners. At least 43 close-in multifamily developments (ranging from 61 to 307 units in size) are in the works that together would add 7,441 new units to the city.

“There’s still a huge wave (of construction) that’s going to hit the market in the coming years,” Barry said.