Construction starts in multifamily are tapering off as would-be developers face diminishing access to capital and slowing rent growth, according to a new report from Institutional Property Advisors (IPA), a division of Marcus & Millichap.  

“Among the 15 markets that account for over half of the nation’s ongoing apartment construction, building starts in the second quarter of 2023 totaled just under half the average volume recorded during the previous two years,” said Greg Willett, national director, research services at IPA. 

The major Texas markets saw the largest year-over-year decline in project initiations during Q2, with Houston, Austin and Dallas-Fort Worth at less than one-third of their year-ago levels. Slowdowns are also pronounced in Philadelphia, Denver, and Washington, DC. 

Since the typical apartment property takes 18 to 24 months to complete, delivery volumes should begin to wane in early 2025 and then drop notably during the last half of the year, according to the IPA report. 

“Rent growth is likely to regain momentum as early as spring 2024, when the normal seasonal upturn in leasing velocity should coincide with obvious signs that today’s new supply excess is temporary,” said John Sebree, national director of the firm’s Multi Housing Division. “Price increases should prove robust during 2025.”   

Sebree and Willett discussed the slowdown in new construction starts, among other topics, during a Sept. 7 webcast with some of the nation’s largest institutional owners. Click here for on-demand replays of the webcast.