We've added more new apartments in the first nine months of 2024 than we did in ANY FULL CALENDAR YEAR since 1987! And more is on the way. Take in the view because many of us many never see numbers like this again in our careers. We're at the peaks. Here are the numbers: -- Completions in 2024 YTD total 438,259 units. That just barely eclipses 2023's full calendar year total. Prior to that, we hadn't built more than 400k units in any year since 1987. -- Completions in Q3 2024 alone approached 163k rental apartment units. That's MORE than nearly every FULL calendar year between 2003 to 2012 (with only exceptions being 2008-09, back when many people thought 200k units was a lot. Ha). -- At the moment, Q3'24 appears to be the top of the mountain. Peak quarterly supply. -- We're on track to add another 161k units in Q4'24. Some of those may get delayed into 2025, but the full calendar year total should still approach the 600k mark -- levels not seen since 1974. -- Supply will remain elevated through much of 2025 in most markets. Completions are then projected to plummet in late 2025 or early 2026, depending on the market, with abruptly dramatic drops likely across the country. -- Remember that the gap between starts and completions in 2024 YTD is the largest on record. We're completing a lot more than we're starting. Permits are way down nearly everywhere, too. All signs suggest we're not only going to see apartment supply drop off, but it could fall well below pre-COVID norms. -- It's difficult to see a scenario where we see these types of numbers again, barring a far bigger shock than any candidate or policymaker is proposing today. It took a perfect storm of factors (cheap debt, ultra-high demand, double-digit rent growth, cap rate compression across asset classes) to get supply at a 50-year high. And while starts will eventually pick back up as the market absorbs all this new product, it seems unlikely to re-accelerate to the levels we saw in this cycle. So, as I said above: Enjoy the view from the peaks because there's a good chance we won't see it again any time soon. #housing #apartments #multifamily #construction
Seems like this will put upward pressure on cap rates in the short term.
would you happen to have a geographical breakdown of where the completions are happenning? That would be super interesting because real estate is extremely local
How will this surge in new completions affect property management strategies, especially with so much new inventory hitting the market in such a short time frame? And what measures can be taken to mitigate potential oversupply in areas where demand might not keep pace with the number of new units coming online?
Looking forward to when these units get absorbed to see where rents stabilize at. A lot of competition already with concessions to attract tenants. A shift to retail would be nice since many of these apartments are built in areas without much else around. Some surrounded by farmland in the outskirts of Phoenix where I live, for example.
Jay Parsons Why we hear that there is a low inventory and that is why prices will stay high?
This post paints a vivid picture of a once-in-a-lifetime peak in apartment construction, and it’s a moment to take stock of the entire market shift. From a collaborative standpoint, it’s crucial to consider how this surge impacts not just developers, but also lenders, investors, and municipalities. What does this flood of supply mean for the rental market and mortgage landscape in 2025 and beyond? With such a sharp drop-off in starts and completions on the horizon, we could see rising demand for debt restructuring, refinancing, or even distressed assets. Proactively collaborating with lenders and developers now to plan for that upcoming dip in supply might help mitigate some of the impact and capitalize on more stabilized demand patterns post-2025. The big question is: Are we ready to adapt quickly when that "perfect storm" of construction comes to an end? In markets like New York, where development timelines and approval processes can be longer, forward-thinking strategies around asset repositioning and financing can become even more valuable. What’s your outlook on the long-term absorption rate of all this supply?
Slow and steady still wins most races. The higher the peak often means the lower the valley. Great news for our friends that have experienced massive delays in recent years being able to push their projects over the finish line. Agreed that they should enjoy the view…however long it lasts!
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1 个月There is nothing to enjoy from this mountain peak. It’s too many units. Cap rate expansion and cost inflation will keep new starts down for several years. Particularly in urban areas where podiums are required for density and they are way too costly and rent premiums are too high to justify. Suburbs garden will likely continue. Thus urban investments may have the strongest rent growth as new supply drops off the most.