HOW MUCH OF AN IMPACT WILL NEW SUPPLY HAVE IN 2024?
New Supply Pressure Decreasing For Most Asset Types
- Retail, Industrial and Office pipelines all show a reduction in new development when compared to 2023
- Apartment construction is slated to rise, but given the housing shortage nationally, expectations are for strong 2024 absorption
Surging Construction Costs Making Development Less Feasible
- Construction materials and labor costs have all risen more than 20% since the end of 2019
- Construction financing costs have risen 300 to 500 basis points since 2019, reaching between 8% and 10% entering 2024
- Developers are facing an increase in overall costs between 25% and 50% since the onset of the pandemic
Long-Term Pipeline Showing Effects of Higher Costs
- Looking forward to 2025 and beyond, the construction pipeline will thin sharply across asset types
*Through 4Q;
Sources: Marcus & Millichap Research Services, Senior Loan Officer Opinion Survey
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