Multifamily Construction Starts Drop 50%, But Pipeline Remains Strong

Multifamily starts have dropped sharply, down 50% from last year to an annualized rate of just 325,000 units in Q3 2024.

Jordan B.
November 11, 2024

Together with

Good morning. Before diving into today’s newsletter, we want to take a moment to honor our veteran readers. Their service, sacrifice, and dedication have helped safeguard the freedoms we enjoy every day.

Now, back to the news: Multifamily starts have dropped sharply, down 50% from last year to an annualized rate of just 325,000 units in Q3 2024.

Today's issue is sponsored by Wall Street Prep—elevate your real estate career with institutional-grade analysis training.

👉 Your perspective matters! Take 4 minutes to share your thoughts on the CRE market's pulse in the Q4 2024 Fear and Greed CRE Survey.

Market Snapshot

S&P 500

GSPC

5,995.54

Pct Chg:
+0.38%

FTSE NAREIT

FNER

822.52

Pct Chg:
+1.43%

10Y Treasury

TNX

4.306%

Pct Chg:
-0.037

SOFR

30-DAY AVERAGE

4.844

Pct Chg:
0.0%

*Data as of 11/8/2024 market close.

Multifamily Report

Multifamily Construction Starts Down 50%

Multifamily construction has dropped sharply, with starts down by half compared to last year, but extended completion timelines are keeping the development pipeline strong.

Construction trends: Yardi Matrix’s Q3 forecast shows multifamily starts slowed to an annualized pace of 325,000 units. However, the slowdown is less sharp than expected, thanks in part to delayed project completions, which help sustain the pipeline.

Pipeline projections: Yardi has raised its 2025 and 2026 forecasts, with planned and prospective pipelines now totaling 4.27M units. Planned units have held steady at 1.1 million, while prospective units saw a quarterly increase of 1.2% and 9.3% year-over-year.

Zoom in: Under-construction inventory dropped in the Sun Belt, while the Northeast and California saw growth. Completion times are rising: garden-style projects now average 688 days, mid-rise 741 days, and high-rises 815 days.

➥ THE TAKEAWAY

Looking ahead: While starts remain low, the existing pipeline and extended build times are stabilizing supply. Yardi Matrix expects a gradual recovery beginning in 2026, with supply bottoming out at 327,000 units in 2027, and rebounding by 2028 and 2029.

TOGETHER WITH WALL STREET PREP

Enrollment is open for the Real Estate Investing Certificate

Enrollment is now open for Wharton Online and Wall Street Prep Real Estate Investing Certificate Program.

This 8-week, online, self-paced program provides students with the fundamental knowledge and real-world skill set needed to excel in today’s CRE industry.

Additional Benefits when enrolling include:

Guest Speaker Series with top CRE professionals
Exclusive networking and recruitment events
Invitation to Closing Ceremony in NYC
Certificate issued by Wharton Online and Wall Street Prep

Don’t miss your chance to invest in yourself and secure your spot in the next cohort. Enroll by January 13th and save $500 when you use coupon code CREDAILY.

*Please see the advertising disclosure at the bottom of this newsletter.

✍️ Editor’s Picks

Labor costs spike: U.S. labor costs grew 1.9% in the third quarter, surpassing expectations and fueling concerns about rising inflation as new data reveals stronger-than-anticipated wage gains earlier in the year.
Stalling: Higher bond yields halted commercial property price growth in October per Green Street, with apartments up 12% year-over-year while office and storage prices fell to 8%.
Rising mortgages: U.S. 30-year mortgage rates rose to 6.79%, their sixth weekly increase, tightening affordability for homebuyers.
Winning: Fortress Investment Group acquired Charles Cohen’s properties, including major assets in New York and Florida, in a $148.7M foreclosure auction following Cohen Realty’s default on a $534M loan.

🏘️ MULTIFAMILY

Local control: Huntington Beach voters passed Measure U, requiring referendums on city-initiated zoning changes that impact the environment, in defiance of California’s state housing mandates.
Chicago foreclosure: CA Ventures faces a $32M foreclosure on a Chicago apartment conversion and additional lawsuits over unpaid debt and investor disputes.
Make it affordable: Step Up Housing acquired Richmond’s Vue at 3600 for $47.3M, aiming to upgrade the affordable complex with 75% income-restricted units.

🏭 Industrial

Earnings report: U.S. logistics real estate faces high vacancy and subdued demand, with Q3 utilization at 84.4% and falling new supply expected to balance the market by mid-2025, per Prologis.
Hot market: BGO Cold Chain acquired the fully leased Medley Cold Logistics facility in Miami for $60M as part of its Core Plus strategy, expanding its national cold storage portfolio.
New storage: Buchanan Street Partners acquired a 2.1-acre site in Upland, CA, for $6.3M to develop a 1,180-unit, climate-controlled self-storage facility, marking its fifth California storage investment.

🏬 RETAIL

Miami expansion: PNC Bank plans to invest $1.5B to open 35 new branches in Miami over five years as part of a nationwide retail expansion.
Holiday spending: A survey shows 67% of parents plan to use buy now, pay later (BNPL) this holiday season to manage spending on gifts, with clothing, electronics, and luxury items among top purchases.

🏢 OFFICE

Blockbuster deal: Cousins Properties is acquiring Charlotte’s Vantage South End for $328.5M, strengthening its Sun Belt portfolio with premium, high-demand office space as return-to-office trends drive leasing interest.
West Palm leasing: Billionaire developer Stephen Ross has secured over 100,000 square feet in new office leases across West Palm Beach, including key tenants at his flagship One Flagler building.

🏨 HOSPITALITY

Airport sale: Piramco purchased the Four Points by Sheraton near San Francisco Airport for $17.7M, a 17% drop from its last sale price a decade ago.

📈 CHART OF THE DAY

Source: MSCI

According to MSCI Real Assets, U.S. commercial property distress rose to $102.6 billion in Q3 2024, though at its slowest pace since late 2022, as new distressed assets outpaced lender workouts by $4.3 billion.