The Floodgates of Multifamily Supply are Opening in 2023

Multifamily developers in the U.S. added over 400,000 apartment units in 2021 and are expected to add 494,000 units in 2023, the highest total supply in over 35 years.

The Floodgates of Multifamily Supply are Opening in 2023

Multifamily developers in the U.S. added over 400,000 apartment units in 2021 and are expected to add 494,000 units in 2023, the highest total supply in over 35 years.

Good morning. In today's email: Multifamily developers built 400,000 new apartment units this year, with no plans of slowing down in 2023. A Westchester town board approved plans for the $1.2B development of North80, the largest development project in county history. Meanwhile, some of New York City’s top brokers see signs of life in Manhattan’s Class B and C office market.

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Multifamily Developers Flood the Market with Highest Supply in 40 Years

Multifamily developers in the U.S. added over 400,000 new apartment units this year. Expect more of the same in 2023, with projected new units for the year at 494,000—the highest total supply in over 35 years.

Rent retreat: Apartment vacancy ticked up to 6% this year, while year-over-year rent growth fell from 11.3% in Q1 to just 3.8%. In markets like NY, DFW, Austin, and Atlanta, developers incorrectly assumed that rental demand would keep pace with supply, building more units than the market could bear.

Dangerous territory: The ratio of a market’s new units to existing inventory is a quick way to gauge if a market is oversupplied. Of 22 major markets, the top 5 have ratios ranging from 7.5 to 5.9%, well above the national average of 2.6%. Notably, the markets under the national ratio tend to be concentrated in the Northeast and Midwest, as investors associated them with slower growth and lower demand.


Keep your trunks on: 80% of the new supply will be luxury apartments, which rent for an average of $600 more per month than mid-tier apartments. Even with concessions, these rents are likely too high for the average renter. Luxury developers may be in for a rude awakening when they find out the pool of renters is shallower than they imagined.


Westchester Welcomes the Largest Development Project in County History

The Mount Pleasant Town Board approved plans for North80—a $1.2B science and technology center in Westchester. Led by developer Fareri Associates, the science-focused campus will encompass 3.0 MSF making it the largest single economic development in Westchester history.

Revitalize the community: The site has direct access to Sprain Brook Parkway in Westchester, and is close to several MetroNorth rail lines. When complete, North80 will feature a walkable Main Street with shops, a hotel, a conference center, restaurants, and public areas.

Great neighbors: The site is next to the Westchester Medical Center, New York Medical College and near the Regeneron Pharmaceuticals (REGN) complex. Regeneron (REGN), Westchester’s largest private employer with over 3,000 employees, is working on a $1.4B expansion of its office campus. The expansion, which was approved by Westchester County in March, will generate another 700 full-time jobs.


Vote of confidence: The North 80 project in Westchester County, New York is the largest economic development project in the county, with an estimated cost of $1.2 billion. The first phase of construction is set to begin next year and is expected to generate around 4,000 construction jobs, 8,000 permanent positions, and over $9 million in annual real estate taxes for the county.


Manhattan Brokers Claim Mid-Tier Office Space is Coming Back to Life

Data from CBRE (CBRE) points to signs of life in Manhattan’s left-for-dead office space. 9.5 MSF of the so-called “commodity stock”, with generic offices, low ceilings, and no amenities, was leased through three quarters of this year.

Bull case: SL Green (SLG), one of Manhattan’s largest office landlords, owns quite a few of the “commodity” buildings. Steven Durels, an EVP at SL Green (SLG), noted that the tier-two buildings “are gaining some momentum in the market.” Proponents claim that this spike in momentum is being driven by companies who want to provide WFH flexibility, while also having a space to build corporate culture.

Bear case: Not everyone is convinced. Deal velocity is slow, and momentum in the “commodity” buildings is mainly in areas close to mass-transit. Franklin Wallach, managing director at Colliers, noted that tenants looking for large and small blocks of space have an abundance of options.


Hurry up and… wait: If the momentum landlords are seeing in the tier-two segment of the market continues next year, it will challenge predictions calling for Manhattan’s office apocalypse. That being said, the data isn’t significant enough to classify this as a return to Manhattan’s office glory days.

📰 Editors' Picks

  • Like a broken record: Expect the Fed, a lack of alternative investment options, supply chain disruptions, and inflation to continue to plague the markets next year.

  • No bull: Redfin Corp. (RDFN) lost its last Wall Street bull, Truist Securities (TFC), in light of the looming recession.

  • Et tu, GSA?: Expect once-reliable government agency tenants to continue to shrink their office footprints, with those in DC leading the way.

  • Too cool for school: Despite strong Black Friday & Cyber Monday sales, overall retail sales dropped 0.6% in November.

  • Cash is king: According to Redfin (RDFN), nearly 32% of home purchases were all-cash in October—the highest since 2014.

  • Move over, Cali: Florida was the fastest growing state from July 1, 2021, to July 1, 2022, with its population increasing by 1.9%.

  • Going once, going twice: With almost $18B sold, 2022 was the best year ever for auction houses.

  • Need a pot of gold: Ireland is facing a housing shortage with no signs of cooling off, driving up costs for both renters and buyers.

🤝 Deals & Dealmakers

  • Perris, not Paris: GLP Capital Partners bought a 355 KSF warehouse in Perris, CA from WPT Capital Advisors for $90M.

  • Conversion candidate: Austin-based SHIR Capital is calling for the conversion of the Wyndham Sacramento hotel into 230 affordable apartments and some self-storage space.

  • Rocky refi: Parameter Realty Partners secured a $28.6M loan to refinance an office building in Old Tampa Bay.

  • Sun Belt strong: General Services Corp. bought the Longitude 82 apartments in Sarasota, FL for $115M.

  • Louisville luxury: Denton Floyd Real Estate Group will redevelop two luxury mixed-use apartment complexes and a luxury hotel & convention center in Clarksville, IN for $226M.

  • Cha-ching in Chicago: A JV between Clear Height Properties and Harbert Real Estate acquired an industrial portfolio totaling 1.4 MSF in the Chicago region for more than $100M.

  • Major distribution: Brookfield Properties (BAM) purchased a two-building industrial development totaling over 1 MSF in Jackson, NJ.

  • In the Journal: A JV between BH3 Management & Hope Street Capital will develop a 400-unit project in Jersey City.

📈 Chart of the Day


Apartment construction is concentrated in and around downtown areas in major markets across the United States. The map shows the markets with the highest volume of construction, both as a percentage of inventory and in total.

Some markets, such as Phoenix, Seattle, and DC, have high supply but may not have enough demand in the short term to keep pace. Other markets, such as Miami and Philly, have seen an influx of high-paying jobs and are performing well.

However, it is uncertain what the impact of the increased supply will be in 2023. Other markets with significant construction activity include Nashville, Charlotte, Atlanta, SLC, Los Angeles, Denver, Chicago, and Raleigh. Texas is notably absent from the list.

😎 Offering-MEME-Orandum

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.

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