Although the number of multifamily units under construction is declining, Yardi Matrix has increased its multifamily completions forecast for 2025 and 2026. The category for those years has been revised by 3.3% and 11.5%, respectively. The decrease in the under-construction pipeline is starting from a high level and falling at a slower rate than its 2021 through 2023 expansion, the firm said in its Q1 multifamily forecast.
The sector is expected to deliver the second-highest new supply since 2008, trailing only 2024’s record volume, the report said. Beginning in 2026, construction starts that began to slow last year will be reflected in completions and new supply will likely bottom out in 2027.
The under-construction pipeline ended the fourth quarter with a 7.2% year-over-year decline to 1.165 million units after expanding by 20.8% in 2022 and 25.2% in 2023 and peaking in March 2024 at 1.275 million units.
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Market-rate and partially affordable properties, which supplied the majority of new units in 2019, will experience a declining share of new supply through 2027. Meanwhile, the affordable sector is expected to deliver 16.3% more units in 2027 than in 2019 and single-family rentals are expected to grow by 188.5% over 2019 levels.
Completion times for garden and mid-rise build types are at their highest level since 2015 at 23.1 months and 28 months, respectively. High-rise property completion times trended upward as well, spending an average of 31.3 months in construction.
Yardi Matrix said it expects the Federal Reserve's higher-for-longer interest rate policy to continue to constrain construction starts this year. The combined planned and prospective development pipelines expanded by 8% to 4.411 million units at the end of 2024, driven primarily by the prospective pipeline. The planned pipeline line has averaged 1.12 million units since May 2023 and stood at 1.14 million at the end of last year.
“Despite a difficult financing environment for new development, there is a large pool of potential projects for highly selective debt and equity providers to consider,” said the report. “New development will occur, but not at the rates seen in 2022 and 2023.”
The prospective pipeline grew 2% in the fourth quarter to 3.27 million units. Continued growth in the prospective pipeline suggests deal sponsors remain optimistic about the long-term prospects for multifamily development. However, given current elevated development lead times, it will be a while before these projects become a reality, the report said.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
