The steady stream of apartment deliveries could soon slow to a trickle, which would give multifamily landlords the opportunity to raise rents once again.
Construction on multifamily units nationwide is dragging and down significantly from a peak hit more than two years ago, the Wall Street Journal reported.
Developers started feverishly building apartments during the pandemic to meet demand, but are easing up as financing on projects becomes harder to come by. In July, the annual pace of multifamily construction starts declined 22 percent year-over-year, according to the U.S. Census Bureau. It was down 41 percent from an April 2022 peak.
Two years ago, rents were soaring, leading more builders into the sector and eventually, oversupply. 610,000 units are expected to be delivered this year, according to CoStar, the highest level of completions since the 1980s. Annual completions are expected to decline in the next two years, however, with projections having deliveries only slightly higher in 2025 and 2026 combined than 2024’s projection.
“Our view is all the new construction is going to finish in the next few months, and nothing new is going to come on line for the next two or three years,” Hamilton Point co-founder Matt Sharp told the Journal.
A reassessment of supply and demand in the market should be a boon for owners, both in terms of rent profits and in terms of property values.
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In June, KKR spent $2.1 billion on 18 apartment complexes, a record multifamily deal for the private equity giant. Lennar’s apartment-building division, Quarterra Multifamily, was the seller of the 5,200-unit portfolio.