Top Western Markets for Multifamily Development

Multifamily development across the U.S. stalled at the beginning of the year, with major Western markets also recording a slowdown in terms of new construction starts. Economic headwinds and high interest rates have led to developers slowing or halting activity nationwide. Still, a few metros stood out among the rest with significant construction pipelines, according to the latest Yardi Matrix data.

We’ve identified the top five markets in the Western U.S. and the state of California for multifamily development, where activity, while still slow, continues to meet demand levels. Combined, these metros had 153,272 units under construction, including SFR BTR and student housing.

Key takeaways:

• Phoenix and Denver led activity, each with more than 40,000 units underway
• Phoenix took the top spot for number of units underway, completions and construction starts
• Activity slowed down nationwide, as all five metros saw a decline to less than half in the number of units that broke ground since last year
• Denver, San Francisco and Salt Lake City recorded an increase in completions year-over-year

1. Phoenix

With 45,384 units under construction, Phoenix ranked first on our list for multifamily development. The metro continued its economic expansion at a steady pace, despite worsening circumstances nationwide. An additional 122,000 units were in the planning and permitting stages.

In this same period, Phoenix added 6,807 units to its inventory, also taking the top spot among Western markets for completions. Bucking nationwide trends, deliveries in the metro decreased by about 1,000 units year-over-year, while most major markets saw a more dramatic slowdown.

A significant project is GMH Communities’ Central Station, a mixed-used development in the downtown area. Its residential component is planned to include 435 student housing units and 362 rental apartments. The joint venture of Medistar Corp., GMH and a fund sponsored by CBRE Investment Management obtained a $204 million loan for Central Station in 2022. Completion is expected later this year.

Phoenix also took the top spot for construction starts, with 4,750 units breaking ground year-to-date through May. However, this was a hefty decline, down to less than half of the 12,816 units that broke ground in the same period last year.

2. Denver

Denver ranked as the second Western market in terms of construction, with a total of 41,086 units underway as of May. Colorado’s capital had robust population growth and a growing tech economy, leading to steady demand for rental apartments. An additional 123,000 units were in the planning and permitting stages.

Denver was one of three metros on this list where completions increased year-over-year. A total of 5,286 units came online year-to-date through May—up 14.9 percent since last year—earning Denver the second spot among the five markets in terms of deliveries.

Meanwhile, construction starts in the metro totaled 982 units, down to about an eighth of the 8,586 units that broke ground in the same period last year.

A newly constructed community that stands out in Denver is The Max Collaborative’s One River North. In a recent interview with Multi-Housing News, the firm’s managing partners talked about the building’s unique biophilic design. The 16-story luxury property opened earlier this year and encompasses 187 units with 13,000 square feet of open-air amenity environments, featuring a design resembling a slot canyon.

3. Los Angeles

Clocking in at number three for multifamily development was Los Angeles, with 32,226 units under construction. The largest among Western markets in terms of population, Los Angeles’ under-construction pipeline was split between its three components:

• Metro Los Angeles, with 17,947 units
• San Fernando Valley, with 7,840 units
• Eastern Los Angeles County, with 6,439 units

Development is likely to remain steady in the coming years, as the market had an additional 175,000 units in the planning and permitting stages. A total of 2,789 units came online across Los Angeles year-to-date through May, down 38.6 percent from 2023’s completions—4,541 units. Among the markets on this list, Los Angeles ranked last for this metric, as the risk of oversupply was relatively high across the metro.

In April, Midwood Investment & Development received approvals for one of the largest multifamily developments taking shape in Los Angeles, within Studio City. Planned to encompass 520 units, Residences at Sportsmen’s Lodge will be constructed in place of a 190-key hotel built in the 1960s. Plans also call for 45,000 square feet of retail, while 78 of its units will be designated as affordable housing.

Construction starts declined 76.5 percent since last year in Los Angeles. Only 1,261 units broke ground in the first five months of the year across the market.

4. Salt Lake City

Ranking fourth among Western markets for development, Salt Lake City had 18,057 units under construction as of May, as well as an additional 50,000 units in the planning and permitting stages. In line with nationwide trends, economic headwinds impacted Salt Lake City’s fundamentals, but it showed resilience despite this, according to the latest Yardi Matrix report.

As the office segment continues to face major fundamental changes, developers are looking to transform underutilized assets into multifamily. One such major project is currently taking shape in Salt Lake City, 1 mile from downtown. Hines started work on South Temple Tower earlier this year. The 217,000-square-foot tower will be transformed into multifamily and is planned to include 217 units. Completion is scheduled for fall 2025.

Salt Lake City developers broke ground on just 883 units in the first five months of the year, which was down to less than a quarter of the 3,761 units that started construction in the same period last year. Meanwhile, the inventory expanded by 3,949 units, up 94.1 percent year-over-year.

5. San Francisco

Rounding out the top five Western markets for multifamily development was San Francisco. The metro had 16,519 units under construction in May, of which 9,557 in the San Francisco Peninsula market and 6,962 in the East Bay Area. San Francisco had an additional 130,000 units in the planning and permitting stages.

Developers broke ground on just 699 units across San Francisco year-to-date through May, yet another dramatic decline from the 3,876 units that started construction in the same period last year. As the city bounces back to pre-pandemic performance, developers are waiting for more opportune economic circumstances.

San Francisco added a total of 3,622 units to its inventory during the first five months of the year, up 20.4 percent year-over-year. One of the largest communities to come online during this time was a 378-unit asset in Oakland, Calif. Cityview completed Portico within the Brooklyn Basin master-planned development with the help of a $107.5 million construction loan from Bank OZK. Apartments range from 611 to 1,316 square feet.

This list includes markets from the "Western", "Northern California", "Central California" and "Southern California" geographic units of the United States, as featured in Yardi Matrix data. Numbers here include number of units in the single-family rental and student housing subsectors as well.