Multifamily construction starts were solid and firm through the first half of the year, resulting in the number of under-construction units not in lease-up on the rise, according to a Q4 Multifamily Supply Forecast Report from Yardi Matrix.

Additionally, the under-construction pipeline increased 7.6% in the third quarter. Therefore, its Q4 supply forecast shows a 5.8% increase in completions for 2024 and a 6.2% spike for 2025, according to its Senior Research Analyst, Ben Bruckner.

It also found that it’s taking longer than normal to complete construction for both garden and mid-rise buildings.

In Q3 2023, the national average completion time for garden apartments was 722 days, well above the trailing four-quarter average of 682 days. Likewise, the Q3 national average completion time for midrise apartments was 760 days, above the trailing four-quarter average of 748 days, Bruckner said.

Bruckner said another indication that development interest is slowing is the continual drop in residential design billings. The September Architectural Billing Index came in at 43.5 – the 14th consecutive month that the index has been below 50. A reading below 50 denotes billing contraction; above 50 denotes billing expansion.

Yardi Matrix said it continues to assume a relatively mild recession starting in late 2023 or early 2024.

“In this scenario, multifamily fundamentals remain relatively solid, while debt and equity financing are reduced but not completely unavailable,” according to Bruckner.

He said deliveries should bottom in 2026, with a modest recovery in new supply taking hold in 2027.

Article courtesy of Richard Berger of GlobeSt.com.