Multifamily Renovation Costs: Where the Market Is Headed by the End of 2026
February 27, 2026
Multifamily New Deliveries Slow in 2026 But Lease Up Backlog & Ongoing Construction Continue To Shape Market Performance
The construction pipeline has been one of the most influential forces shaping multifamily performance over the past several years. Since 2020, annual deliveries have remained historically elevated, reaching a peak of nearly 600000 units in 2024.
At the start of last year, many expected a meaningful slowdown in deliveries by 2026 and an even sharper pullback in 2027. As 2025 progressed, however, that outlook shifted. Entering 2026, it is clear that new construction will continue to play a major role in multifamily performance in the near term.
A Large Backlog of Lease Up Units
When discussing supply, most attention is given to projects still under construction. Equally important are the communities that have recently delivered and are still working toward stabilization.
Nationwide, roughly 740000 units have begun leasing but have not yet reached stabilized occupancy. That lease up inventory creates a highly competitive environment for both existing properties and communities preparing to deliver this year.
Half of that national lease up backlog is concentrated in just fifteen markets. Twelve of those markets are located in the Sunbelt, which has led the country in new development activity over the past five years.
This backlog will continue to influence rent performance in 2026. National occupancy has remained below its typical range since early 2023. Although net absorption has steadily improved from its 2022 low point, effective rent growth continues to face pressure.
Concessions remain a key factor. Lease incentives have limited effective rent gains across many markets. A broad reduction in concessions would support stronger rent performance, but properties still in lease up and new communities entering the market are unlikely to lead that shift in the short term.
What to Expect From the 2026 Pipeline
Approximately 415000 units are projected to begin leasing in 2026. While that number is lower than the 455000 units delivered in 2025 and well below the 2024 peak, it remains elevated compared to long term historical averages.
At the market level, familiar trends continue. Twelve of the fifteen markets expected to see the most deliveries this year are in the Sunbelt. The remaining markets include major gateways such as New York, Los Angeles Orange County, Washington DC, along with Seattle and Denver.
Because new supply remains concentrated in markets that have already absorbed significant development, performance differences between markets are likely to continue and may even widen. Markets facing less supply pressure could lead the nation in rent growth, even as Sunbelt markets continue to post strong absorption numbers.
When measuring construction as a share of existing inventory, the regional imbalance becomes even more pronounced. Fourteen of the top fifteen markets by this measure are in the Sunbelt, with Providence Rhode Island as the lone exception. In each of these markets, at least five percent of existing inventory is currently under construction. In Fayetteville and Fort Myers Naples, that figure climbs to sixteen percent and thirteen percent, respectively.
Among larger primary markets, Charlotte, Orlando, and Nashville stand out. Each ranks among the top fifteen when adjusting for market size, which is notable because this metric often highlights smaller markets. These cities have consistently been national leaders in new supply in recent years.
It is also worth noting that projected deliveries for 2027 have increased compared to expectations earlier last year. While forecasts can shift, current projections exceed 500000 units. That suggests supply pressures could persist longer than previously anticipated.
Key Takeaways for Owners and Operators
Although annual deliveries have moved past their 2024 peak, the combination of a substantial lease up backlog and an active construction pipeline means supply pressures will not disappear overnight.
This dynamic is especially evident in the Sunbelt, where markets continue to lead in new deliveries even as construction activity begins to moderate.
The record breaking net absorption seen last year is unlikely to be repeated. Still, the gradual moderation in deliveries should provide some incremental relief for an industry that has added nearly 2.5 million units over the past five years.
At Think Construction Services, we understand how shifts in supply directly impact renovation strategy, capital planning, and asset positioning. In competitive environments like this, execution, timing, and product differentiation matter more than ever. Owners and operators who stay proactive will be best positioned to navigate the next phase of the cycle.
