Multifamily Deliveries Will Top Last Year's Levels By 50%

Under the basic understanding of economics and the relationship between supply and demand, there comes a time when more inventory means less money. Customers can have their pick; competitors come to a point where they start lowering prices. Pricing power gets harder to come by in general.

That’s been happening increasingly in multifamily markets, especially those in the South and West that have seen inflow migration from states and cities in the Northeast and Midwest. And it will only get worse this year, according to RealPage, which is predicting that scheduled multifamily unit completions in 2024 will eclipse the record-breaking levels in 2023.

Blame the pandemic as the time at which systemic shortcomings came to a head. “Back when apartment occupancy and rent growth were hitting record highs across the nation in 2021 and 2022, we saw a surge in multifamily permitting activity,” they wrote. “As a result, 2023 logged a big increase in deliveries, with nearly 440,000 apartment units completed throughout the year, a 36-year high for the market. For 2024, scheduled completions in the U.S. total another 670,000 or so apartments, which blows past that record volume by about 50%.”

That was then, this is now, and conditions are different. Occupancy and rent growth are far more moderate, regressing to the historical mean. However, once started, the machinery of development and the need to lease up for the payoff has inertia and can’t immediately stop on command.

The South was one of the big targets for the new construction because companies were in search of lower taxes and less regulation, while people wanted easier winter weather and jobs. As in 2023, the region is also expecting about 53% of the new completions, with Texas the largest winner. “South region markets with more than 20,000 units of supply set to deliver next year are Dallas (38,400 units), Austin (33,800 units), Atlanta (23,100 units), Houston (22,700 units) and Charlotte (21,100 units),” they wrote. “All of these markets were also among the top 10 for deliveries in 2023.”

In total, the South will get more than 358,000 units; the west, about 183,000 more units. The Midwest and Northeast are slated for 62,000 to 67,000. New York City (24,700) and Newark (19,900) are some of the bigger amounts. No city in the Midwest is in the top 10 for deliveries.

Ultimately, the question will be what effect the heavier deliveries will have on metro markets, apartment occupancies and rents, and the financial fortunes of developers, owners, and investors.