Yardi Matrix has increased its multifamily supply forecast for 2023, 2024, and 2025 as the under-construction pipeline continues to expand.
As part of its third quarter update, with starts to date this year not exhibiting any significant signs of a slowdown, it boosted its forecast completions by 6.9% to 484,943 units for 2023 and 6.5% to 506,574 units for 2024.
According to Yardi Matrix, for multifamily markets tracked on or before January 2020, just over 1.1 million units are in the under-construction pipeline. Of these units, over 429,000 are in lease-up, which is in line with the trailing 12-month average of 421,000 units. Most of these units are expected to be completed this year or in the first half of 2024.
In addition, Yardi Matrix is tracking approximately 688,000 units under construction that are not in lease-up, a 36.9% increase year over year and a 96.7% increase from pre-pandemic levels.
The report shares that, despite tightened financial conditions, Yardi Matrix has identified 92,603 units that started construction in the first quarter. According to the firm, the data is collected with a lag so it expects the number to most likely grow. Based on historical patterns, first-quarter starts are expected to come in around 130,000 units, which is close to the 129,000 units that were started in the first quarter of 2022.
“Construction completion times remain elevated, with both garden and mid-rise delays in construction at or near record levels,” stated the report. “Elevated completion times are a contributing factor to the recent increase in under-construction inventory.”
Longer term, Yardi Matrix has updated its forecast with a 3.1% increase in completions for 2025 to 424,899 units. With starts remaining robust at the start of this year, these units will most likely be completed in 2025. For 2026, projected completions have been reduced by 5% to bottom out at approximately 401,000 units. A gradual recovery in new supply is expected to take hold in 2027 and into 2028. Yardi Matrix marginally reduced its completion forecasts for 2027 and 2028 by just over 2% to 417,378 and 426,722 units, respectively.
“We are not yet seeing a sudden increase in the planned pipeline indicative of a material drop-off in new-construction starts,” noted the report. “This is something we anticipate happening in the second half of 2023, and we’ll continue to monitor the evolution of the planned pipeline closely.”