Yardi Matrix released an updated multifamily supply forecast which predicts more new apartments completing in 2023, 2024 and 2025 than did earlier forecasts. However, the new apartment supply forecast for 2026 through 2028 was reduced.
Setting the baseline
The Yardi Matrix multifamily supply forecast is based on the assumption that the Federal Reserve’s interest rate hikes will cause the economy to experience a mild recession starting in late 2023 or early 2024. The recession is expected to cause a falloff in construction starts, reducing multifamily unit completions in 2025 and 2026.
Yardi Matrix now expects 484,943 units to be completed in 2023, 6.9 percent more than they projected in their forecast published last quarter. Completions are expected to peak at 506,574 in 2024 before falling to a cycle low of 401,065 in 2026. Completions are then forecast to recover to 426,722 in 2028.
Austin leads all metros for the volume of new supply expected in both 2023 and 2024 at 24,145 units and 24,714 units respectively. Phoenix (18,571 units), Denver (15,677 units), Charlotte (14,275 units) and Miami (13,141 units) round out the top five for 2023.
Colorado Springs leads in the percentage of new supply expected in 2023 relative to current stock at 10.7 percent. However, Huntsville takes the lead in 2024 at 11.6 percent. The other top-five metros for percentage of existing stock expected in 2023 are Austin (8.9 percent), Miami (8.5 percent), Southwest Florida Coast (7.1 percent) and Charlotte (7.1 percent).
Growing the pipeline
The forecast notes that there are currently 1,118,046 new apartments under construction in the markets that Yardi Matrix tracks. Of these, 429,626 are now in lease-up while the other 688,420 units are not yet at that stage. The near-record lengths of time required to complete projects is contributing to the high number of units under construction. Garden apartment projects are currently taking around 640 days, mid-rise projects are taking around 750 days and high-rise projects are taking around 880 days to complete.
It takes some time for Yardi Matrix to collect data on construction starts, so they do not have final numbers for starts in Q1 2023. However, they expect starts in Q1 to come in near the 129,000 units that started in Q1 of 2022. Seasonally-adjusted data from the Census Bureau put Q1 2023 starts at 134,000 units in projects with 5 or more units per building.
Looking ahead
Yardi Matrix quoted two other figures that look further out in time, planned units and prospective units. Planned units are up 24.7 percent from this time last year at 1.19 million units. The number of prospective units was given as 3.13 million units.
The full report contains many informative charts. It is available here.
