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U.S. Apartment Construction to Hit All-Time High in 2024

2024 marks the first time U.S. apartment completions will exceed 500,000 units, with 2 million more expected by 2028.

U.S. Apartment Construction to Hit All-Time High in 2024

2024 marks the first time U.S. apartment completions will exceed 500,000 units, with 2 million more expected by 2028.

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Good morning. The U.S. is set to add a record-breaking number of apartments this year, with over half a million new units expected to hit the market. Plus, Jamie Dimon still sees a 65% chance of a U.S. recession.

Today’s issue is sponsored by Reap Capital.

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🎙️ Listen: Episode 5 of No Cap by CRE Daily is live! Jack Stone and Alex Gornik sit down with Michael Mandel, a former broker and CompStak® founder, to talk about the impact of data and AI on CRE.

Market Snapshot

S&P 500
GSPC
5,344.16
Pct Chg:
+0.47%
FTSE NAREIT
FNER
787.82
Pct Chg:
+0.45%
10Y Treasury
TNX
3.94%
Pct Chg:
-0.057
SOFR
1-month
5.35%
Pct Chg:
0.0%

*Data as of 8/9/2024 market close.

Construction Outlook

U.S. Apartment Construction to Hit Record High in 2024

The U.S. apartment market is set to break records in 2024, with over 518,000 new rental units completed, marking a historic high in construction.

A record year: According to RentCafe, 2024 marks a historic milestone for apartment construction in the U.S. as the number of completions surpasses 500,000 units for the first time on record. This influx of new inventory is a 9% increase over 2023 and a 30% rise from 2022. For context, that’s enough units to house the entire population of Atlanta.

Rent Cafe U.S. New Apartment Deliveries by Year

Source: RentCafe Analysis of Yardi Matrix

Leading the way: For the third consecutive year, New York is set to lead completions with nearly 33,000 new units, driven by a surge in Brooklyn, which will account for almost 30% of this supply. Dallas is close behind, with 32,932 units, and Austin follows with 21,506 units. Together, these two Texas metros will contribute nearly 10% of all new apartments nationwide by the end of 2024.

Close contenders: Phoenix and Atlanta round out the top five markets, expecting over 20,000 and 18,000 new apartments, respectively, by year’s end. These cities are benefiting from strong population growth and demand.

Looking ahead: RentCafe says the U.S. is expected to add 2 million new apartments by 2028. Interestingly, about 47% of the 369 metros analyzed are projected to build more apartments over the next five years than they did between 2019 and 2023. However, a slowdown is anticipated in 2025, with a 15% decline in completions compared to 2024.

➥ THE TAKEAWAY

Why it matters: The US apartment market is to reach new heights in 2024 for the third year in a row, but the focus is shifting towards lower-risk projects as developers brace for a slowdown in the coming years. By 2028, we could see another surge, but the path will be shaped by economic conditions and demand.

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✍️ Editor’s Picks

  • Going private? Bill Ackman’s Pershing Square Capital is considering taking Howard Hughes Corporation private, following the recent spinoff of Seaport.

  • Healthcare JV: Catalyst Healthcare Real Estate and Heitman formed a $300M joint venture to develop healthcare properties across five states.

  • Never coming back: Job listings are shifting from large city centers to smaller metro and rural areas, possibly signaling a long-term geographic redistribution.

  • Ethics scandal: D.C.’s No. 2 buildings official, Caroline Lian, resigned after a probe revealed she secretly held a full-time job at Freddie Mac while working for the city.

  • Red-hot: CRE brokerage stocks like CBRE, JLL, and Newmark are seeing stock increases of up to 23% over the past month, fueled by improved earnings and anticipated Fed rate cuts.

  • Holding firm: Jamie Dimon sees a 65% chance of a U.S. recession, diverging from JPMorgan’s economists who estimate a 35% likelihood.

  • Buffett’s bungalows: Three Palm Beach homes owned by the late Jimmy Buffett are listed for over $20M, offering potential buyers a “Key West meets Palm Beach” experience.

🏘️ MULTIFAMILY

  • Deep discount: Ready Capital sold $20M in loans at $0.70 on the dollar and has $450M more in contract for Q3, expected to sell at even steeper discounts.

  • Rising distress: Multifamily CLO distress is surging, with nearly $57B in troubled loans, threatening apartment flippers who invested during the pandemic’s low-interest boom.

  • Slowing down: Nationwide single-family rental home inventory increased by 16.7% YoY in 1H24, leading to longer market times and slower rent growth, especially in Florida.

  • Miami development: The owner of South Beach’s Sagamore Hotel plans a 561-unit multifamily project with 20K SF of retail space on a long-vacant North Miami site.

  • Boston’s senior solution: Massachusetts’ $5.2B housing bond bill aims to tackle the severe shortage of affordable senior housing as the state’s elderly population grows rapidly.

🏭 Industrial

  • Data Center deal: Thor Equities purchased a 270-acre site near Atlanta for $50M, aiming to convert the facility into a data center.

  • Industrial expansion: Tempus Realty Partners acquired three industrial properties across Maryland, Alabama, and Wisconsin for $29M, marking their second portfolio addition this year.

🏬 RETAIL

  • Rethinking retail: Ace Hardware is investing $1B in a new experiential store concept, “Elevated Ace,” featuring enhanced showrooms and outdoor spaces, with a rollout starting in Q4.

  • Lucrative conversion: Montreal’s Centre Carnaval mall sold for $70M after securing approval to add 1,800 residential units, showcasing the profit potential in retail-to-mixed-use conversions.

  • Acquisition: DLC and Meadow Partners acquired the Penn Mar Shopping Center near Washington, D.C., for $68.5M, enhancing their grocery-anchored retail portfolio in Prince George’s County.

🏢 OFFICE

  • High-stakes gamble: Related California plans a $600M, 41-story hotel and office tower in San Francisco, betting on premium space despite high office vacancies.

🏨 HOSPITALITY

  • Add it to the collection: Oracle founder Larry Ellison has acquired the luxurious Eau Palm Beach Resort & Spa, expanding his portfolio of high-end resorts.

  • “Rock ‘n’ roll”: French-born baker Michel Suas bought the land beneath San Francisco’s Phoenix Hotel for $9M, with redevelopment options when the ground lease ends in 2025.

  • A better choice: Choice Hotels sold its remaining $91M stake in Wyndham after a failed hostile takeover, shifting focus to expanding its own brands like Everhome Suites and Radisson.

📈 CHART OF THE DAY

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