What Can We Learn From 5 Years of Construction Starts?

The pandemic has been a major multifamily development driver, we’ve found while looking at data provided by Yardi Matrix. Between 2019 and October 2024, construction starts surpassed 2.5 million multifamily units across the U.S.

As demand for upscale apartments has increased, developers kept their focus on Lifestyle properties, with the segment accounting for an overwhelming majority, nearly 2.1 million. The working-class Renter-by-Necessity component accounted for 446,000 units of the total as workforce housing continues to largely struggle.

Supply has a big impact on the multifamily sector’s fundamentals. It will continue to determine the market performance, both in the medium- and long-term, impacting overall rent performance, investment activity and relative affordability.

Key takeaways

• Texas metros occupy the first three positions in new construction starts recorded between 2019 to 2024
• Dallas led by total volume of construction starts between 2019 and 2024 as well as annually throughout the interval
• Only four markets posted construction starts volumes above 10,000 units in 2024 through October—Dallas, Austin, Phoenix and New York
• Most metros recorded peak construction starts in 2022 except New York and Phoenix—both saw development at their highest in 2023
• Construction starts recorded in 2024 through October surpassed the year total in 2019 only in Phoenix and New York
• Occupancy in stabilized properties increased in Miami and Washington, D.C.
• Deliveries surpassed construction starts only in Los Angeles and Seattle

In 2019, developers broke ground on 422,289 units nationally. In the year marking the onset of the pandemic, the volume rose just slightly in 2020, to 424,145 units. Stimulated by lockdowns and sustained by remote work, the demand for (especially) suburban homes outpaced that in urban centers and development picked up sharply over the next two years—490,290 units in 2021 and a considerable 663,795-unit volume in 2022. In 2023, the volume of construction starts declined but the year ranks second highest in annual volume with 588,431 units.

Rising interest rates and construction costs, coupled with high inflation, led to a wait-and-see approach throughout 2024, as the volume of construction starts dropped to 242,263 units through October. In 2024, Woodfield Development broke ground on roughly half the volume recorded on an annual basis between 2020 and 2023. But "that is more of a function of future starts getting pushed into 2025 due to a variety of factors unrelated to the markets themselves," according to Greg Bonifield, partner at Woodfield Development. Positive signs arise as construction costs have been falling in many markets over the last six to 12 months, he said, with the pricing trend "slightly" downward.

Using Yardi Matrix data, we looked at the 14 U.S. markets that managed to average 10,000 new units breaking ground per year during this interval. In the following breakdown, we’ll look at the performance of these metros during the 2019 – 2024 interval, including information about deliveries and occupancy.

An all-Texas podium confirms state's dominance

The first three spots nationally for construction starts between 2019 and 2024 year-to-date through October were all occupied by Texas metros—Dallas, Austin and Houston.

"In the past 10 years, Texas' population has gained more than 4 million people, which leads all states and is roughly 22 percent of the nation’s growth over that period. Dallas and Houston alone have each grown more than all other states except Florida," recalled Adam Saphier, president of Trammell Crow Texas. Such growth spurred demand for multifamily housing and, of the 32 multifamily projects Trammell has begun since 2019, 12 have broken ground in Texas. "That count is spread evenly across the three Texas markets where we have offices (Austin, Dallas and Houston)," he added.

Dallas maintained the leading position in the U.S. every year throughout the period for a combined volume of 162,773 units. Nearly 90 percent of these, or 145,494 units, were in upscale Lifestyle projects. The pandemic’s impact was minor, with new construction maintaining an average of 25,000 units per year between 2019 and 2021. New construction peaked in 2022 (37,380 units) and 2023 (35,530 units), sustained by DFW’s strong economy and favorable migration trends, which contributed to the metro’s population increase of 4.8 during the interval.

At the start of 2024’s fourth quarter, new construction fell to 13,177 units, roughly half the volume recorded in 2019. Dallas’ stock expanded by 156,086 units during the six-year period, substantially heavier on the upscale side, which accounted for 92.2 percent of deliveries, or 143,918 units. Despite the robust stock expansion, the occupancy rate in stabilized properties fell just 150 basis points during the period, to 91.8 percent in October 2024.

Austin ranked second with 120,194 units breaking ground during the 2019 to 2024 period. The composition was slightly more inclusive of RBN units, which accounted for 18 percent of incoming projects.

In 2019, Texas’ capital had the lowest construction start volume among these three Texas markets (16,852 units), but it maintained a steady upward trend every year until peaking in 2022, when developers broke ground on 33,679 units. Although still robust, the volumes posted in the following two years paint a decelerating trend—19,122 units in 2023 and 10,291 units in 2024 through October.

Between 2019 and 2024, developers delivered 93,127 units in Austin, 83.2 percent of which were Lifestyle units. Meanwhile, occupancy dropped 2.7 percent during the period, to 91.3 percent as of October.

Houston ranked third with a construction starts volume of 106,520 units during the period. Houston had the highest composition of Lifestyle projects breaking ground during this time, accounting for 91.6 percent. The pandemic had a greater impact on Houston’s development scene, with new construction falling from the 23,531-unit volume posted in 2019, to 19,181 units in 2020 and 14,596 units in 2021. It marked a short-lived recovery in 2022 (24,205 units) but then moved closer to the mean—19,333 units in 2023 and just 5,674 units in 2024.

Completions totaled 101,441 units, also substantially favoring the upscale segment, which accounted for 94 percent of all deliveries, or 95,341 units. Occupancy endured, down just 40 basis points to 91.0 percent.

Woodfield Development is one of the investors who took note of activity in the major Texas markets. It opened an office in Texas three years ago and has 815 units under construction across two properties. One is in San Marcos, Texas, located on the Interstate 35 corridor connecting Austin and San Antonio, and the other is in Fort Worth. The company anticipates that work will begin on 12-to-15  projects next year, including in Dallas and Houston, as well as in central and south Florida, Raleigh metro, Nashville, Charleston and Greenville, South Carolina, and Atlanta. 

Another fast-growing region, the Southeast made the top ranks

Miami and Atlanta rounded out the top five, while Orlando and Charlotte ranked 10^th and 11^th, in the group. Developers broke ground on 100,142 units across Miami between 2019 and 2024, with 82 percent of construction starts adding to the Lifestyle segment. In Atlanta, the volume during the period totaled 93,459 units, 84.5 percent of which were upscale units.

Following a brief softening in new construction activity at the onset of the pandemic, Miami rebounded quickly in 2021 (19,574 units) and 2022 (23,600 units) in response to rising demand. Financial hardships led to a slowdown in new construction starts throughout the next two years—20,300 units in 2023 and 8,315 units in 2024 through October. Completions during the period amounted to 86,614 units, 17 percent of which were RBN apartments. Miami is one of the few metros where occupancy during the period increased, up by 50 basis points to 94.5 percent in October.

Similar to Austin, construction starts in Atlanta and Orlando increased progressively year-over-year until peaking in 2022. In Atlanta, the peak represented 25,967 units. In the following two years, new construction softened—to 19,163 units in 2023 and 7,941 units in 2024. During the nearly six-year period supply growth totaled 90,682 units—with Lifestyle accounting for 84.3 percent—while occupancy fell 2.3 percent to 90.8 percent in October 2024.

Orlando’s annual construction starts rose gradually from 10,642 units in 2019 to 16,843 units in 2022, followed by two years of moderation—13,191 units in 2023 and 7,630 units in 2024 through October. Overall, during the six-year period, developers broke ground on 73,622 units, of which 66,526 units, or 90.4 percent, were Lifestyle apartments. Completions during the period totaled 65,088 units, 92.6 percent of which were Lifestyle apartments, while occupancy fell 120 basis points to 92.9 percent in October 2024.

Western markets kept some of their allure

Denver and Phoenix occupied the sixth and seventh position nationally, and although their performance was almost opposite, the outcome by number of construction starts recorded between 2019 and October 2024, was similar, with totals of 86,331 and 86,217 units, respectively. In line with national trends, the composition by asset class was also heavily skewed toward the Lifestyle segment—Denver had 81.2 percent of new projects in upscale properties, and Phoenix 87 percent.

The pandemic had initially moderated new construction activity in Denver, with construction starts sliding to 11,201 units in 2020 from 12,199 in 2019, but picked up the following two years—16,353 units in 2021 and up to 23,952 units in 2022. In 2023, the economic landscape slammed the brakes on new construction, with the volume dropping to 16,967, and nearly coming to a halt in 2024, when just 5,659 units broke ground.

Phoenix was on a somewhat different route, with construction starts nearly doubling in 2020 (14,533 units, up from 8,528 units in 2019), and maintained steady growthy every year until 2023 (18,057 units) before sliding down to 12,584 units this year through October.

With a solid job market and strong population increase, Phoenix is one of the two metros in this group that had more projects breaking ground in 2024 than in 2019. "Arizona was the state with the fifth highest population growth over the past decade," said Saphier, which prompted TCC to break ground on three multifamily projects in Phoenix since 2019.

Deliveries in these western markets during the period were slightly below the volume of construction starts—Denver had 76,652 units come online, 82.5 percent of which were Lifestyle, while Phoenix’s stock expanded by 64,844 units, 87.9 percent of which were Lifestyle. While in Denver occupancy remained flat at 93.7 percent, Phoenix’s rate dropped 200 basis points to 92.4 percent.

Gateway markets made ranks even in slower years

Ranking eighth in this group, Washington, D.C., had 84,872 units that broke ground between 2019 and October 2024, 83 percent of which were Lifestyle apartments. Construction starts by year fluctuated, dropping from 16,648 in 2019 to 13,822 units in 2021.

New construction volumes peaked at 18,550 units in 2022, sliding back to 13,296 units in 2023, and further down to 8,059 units in 2024. The delivery volume during the period was slightly below the volume of construction starts during the interval, totaling 81,716 units, 86.4 percent of which were upscale apartments. Demand remained strong, with occupancy up 10 basis points during the period to 94.7 percent in October 2024 and above 93.5 percent throughout the interval.

New York ranked ninth in this list, with 79,597 units breaking ground between 2019 and 2024. Nearly 30 percent were RBN, leading all other metros in this ranking by share of new working-class units. During the first three years of this interval, annual volumes of new construction remained steady at 10,269 units per year. Construction activity picked up in 2022, with the volume up to 14,585 units, and peaked in 2023 with 22,151 units. Through October 2024, 12,054 units broke ground in New York, a volume surpassed only by Phoenix and Dallas.

Deliveries were sluggish in New York, with only 52,333 units coming online between 2019 and 2024, 31 percent of which were RBN apartments. The metro’s rental market remained tight, with the occupancy rate in stabilized properties at 98.2 percent in October 2024, a 10-basis-point decline from 2019.

Looking ahead, high volume set to endure

By 2025, peak supply will have likely passed. A good chunk of next year's deliveries will be in projects initiated before financing costs had peaked. Yardi Matrix's supply forecast anticipates volumes will decline through 2027—to 554,288 units in 2024, to 508,089 units in 2025, followed by 2026 and 2027 with completions in an even lower 320,000 to 370,00-unit range.

The steep decline in construction starts suggests a very different supply environment by 2026 and 2027, according to Louis Rosenthal, director at Global Development Research with CBRE’s Real Estate Investments. The national housing shortage remains high, "estimated to range from 1.5 million to 5 million units, depending on the measure," he said, and will continue to drive development. Market and location selection will likely require a more nuanced approach than was recorded over the past four years, and this decision will ultimately hinge on balancing short-term supply dynamics with longer-term fundamentals like job growth and affordability.

With construction costs moderating significantly from recent highs and interest rates beginning to ease, there’s likely a floor to how far apartment construction starts will fall next year, Rosenthal added.