Supply Pipeline
Also called: Construction pipeline, Units under construction
The supply pipeline is the volume of multifamily units permitted, under construction, or planned in a market, typically expressed as a percentage of existing inventory.
The pipeline is the most forecastable input in market selection. Construction takes eighteen to thirty months, so units delivering over the next two years are already visible today, which makes near-term supply risk unusually knowable compared with rent growth or cap rates.
Expressed as a share of existing stock, the pipeline becomes comparable across markets of different sizes. A pipeline above roughly 5% of inventory signals meaningful near-term rent pressure, which is why fast-growing Sunbelt markets with strong demographics can still deliver weak rent growth for several years.
Rules of thumb
- Weight units under construction far more heavily than units merely planned or permitted. Planned pipelines routinely fail to break ground.
- Check submarket concentration. A metro pipeline of 3% can still mean 12% in the specific submarket where you are buying.
Related terms
- Absorption
Absorption is the net change in occupied units in a market over a period, measuring how quickly new and existing supply is being leased by tenants.
- Submarket
A submarket is a geographic subdivision of a metropolitan area that functions as a distinct competitive set, where properties compete directly with each other for the same pool of renters.