The multifamily pipeline was slightly larger than expected at the end of the first quarter, pushing the Yardi Matrix forecast for completions up by about 2% through 2027. Although the under-construction pipeline has been declining since it peaked in March 2024 at 1.275 million units, it still contains about 1.10 million, an extensive inventory that supports more than 500,000 units of new supply this year and 400,000 in 2025, said the firm.
The report said nearly 538,000 under-construction units were in pre-lease at the close of the first quarter, a 12% decline from the fourth quarter. Under-construction units in pre-lease peaked in September, and most of the inventory now in that category should be complete by the end of the first quarter of 2026, according to Yardi.
Construction starts in the multifamily sector moderated significantly in 2024, down 36.4% from 2023 and 40.7% from 2022. New supply will likely not completely bottom until 2027, said Yardi.
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Completions across property types are expected to decline through 2027, including a 38% dip in market and partially affordable properties. These properties represent a smaller share of the overall multifamily product mix, dropping from 84.2% of the market in 2018 to 75.1% of the market today. Affordable properties are expected to decline by 24%, and single-family rentals are forecast to drop by 27%.
The report noted that tariff policy has added great uncertainty to how multifamily construction starts will unfold throughout 2025.
“On the one hand, higher tariff rates will result in a one-off increase in import prices and construction costs, a potential headwind for new multifamily development,” said Yardi.
“Additionally, higher tariff rates also imply a near-term slowdown in economic activity that depresses rental rate growth and thereby new-development interest. On the other hand, a weaker growth environment would also lead to easing monetary policy and provide a tailwind for new multifamily development.”
Days in construction increased during the first quarter for garden, mid-rise and high-rise build types to their highest level since 2018, according to the report. This is likely driven by the unexpected increase in the under-construction pipeline. Garden properties take an average of 718 days to complete, while mid-rise properties take 837 days. High-rise property completion times rose dramatically to 1,043 days, or nearly 35 months, well above the trailing four-quarter average of 887 days.
The combined planned and prospective pipelines held 4.463 million units at the end of Q1. While the number of units in the planned pipeline was relatively flat throughout 2024, the prospective pipeline has exhibited steady growth. Currently, there are about 1.12 million units in the planned pipeline and 3.35 million units in the projected pipeline.
“Continued growth in the prospective pipeline suggests developers remain optimistic about long-term prospects,” said Yardi. “Given current development lead times, it will be some time before these projects are completed.”
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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.
