New Supply Outlook and the Impact on CRE
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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