Apartment developers are undeterred by a glut of new supply arriving on the market after a pandemic-era surge in construction starts.

Developers broke ground on 355,000 apartments at multifamily properties with five or more units on an annualized basis in January, according to new data from the federal government. That’s down 11% from the prior month but still 2.3% higher than the same period last year.

Multifamily units accounted for 26% of the 1.3 million housing starts recorded in January on a seasonally adjusted basis.

The modest boost in new starts comes as developers complete an annualized rate of 652,000 apartments in January, up nearly 12% from the prior year and more than 10% from December, Multifamily Dive reported. Apartments accounted for 39% of all annualized housing deliveries in January.

Developers are keeping a similar pace this month. The U.S. Census Bureau and Department of Housing and Urban Development counted 1.5 million permits pulled at an annualized rate in January, virtually flat from December.

Apartment developers pulled a seasonally adjusted 427,000 permits, flat on the year but down 1.4% from the previous month.

The increase in apartment construction reflects investors’ warming view of the asset class, led by early moves from some of the biggest players in acquisitions and private equity.

Sales volume in 2024 was up 22% from the prior year, with portfolio deals growing 54% to $35B. That includes Blackstone’s $10B acquisition of Apartment Income REIT Corp. in June and Equity Residential's plan to pay Blackstone $1B for 11 other multifamily properties.

Multifamily vacancy ticked up to 6.1% at the end of 2024, but effective rents also grew and are only $12 below its historical high, according to a recent report from Moody’s. As new inventory is absorbed, Moody’s expects vacancy to drop as low as 5.7% by 2027.