Real Estate Market Update! Here are five factors affecting the supply and vacancy rates of US multifamily properties:
- Clarion Partners estimates that new multifamily supply in the US will peak in 2024 and anticipates declining supply in 2025 due to a sharp fall in multifamily permits and starts.*
- Rising costs for materials, labor, and land, combined with inflation, have made multifamily construction more expensive and less appealing to developers.
- Strict zoning laws and complex regulations have limited where multifamily units can be built, slowing new development projects.
- At the same time, high interest rates increased borrowing costs, making it more expensive to finance new multifamily construction, which has discouraged developers.
- Going forward, limited supply and falling vacancy rates should support multifamily rent growth and bolster multifamily real estate values.
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*As of a September 2024 Clarion Partners research publication.
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