The total pipeline is the total planned rentable area (RA), in square metres, of all real estate development projects that have acquired building permits but that have yet to reach effective completion, in a specific real estate asset class, in a defined geographic region, at a point in time. When projects exit the pipeline, they can be referred to collectively as “new construction” in a market.
New construction is the most critical and important supply concept driving real estate markets.
The term new construction refers to completions. The new supply of real estate has three stages, commonly referred to as the “pipeline.” These are marked by three project milestones:
1. Permit (or pipeline entry): the development receives the permit or permission of the authorities based on approved plans.
2. Start or startup of construction, which usually means that “shovels are in the ground” but can be more complicated.
3. Completion: the property is given occupancy certification.
In reality, not all projects that enter the pipeline reach completion. There are “leakages” at every stage, where projects get put on hold, become stalled and are abandoned. The percentage of permits that become starts and the percentage of starts that become completions varies under different market or cyclical conditions.
This is why the projected pipeline is perhaps a more useful metric than the total pipeline because it takes into account only those projects that are truly predicted to be completed by a defined point in time in the future (although one cannot be absolutely sure about the probability of completion for all projects in a market).
Given the considerable time that intervenes between project start and project completion, new construction is reasonably forecastable in the short-run (and not necessarily in the long run) by counting projects and estimating delivery times.
This article from reit.com gives an idea of the importance of the pipeline concept in real estate.