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Multifamily: Rent Growth Sluggish Due to Ongoing Supply Deliveries
Recent reports about the health of the multifamily sector indicated that supply deliveries continue to moderate rent growth. Yardi Matrix’s recent National Multifamily Report and Apartment List’s National Rent Report pointed to slow rent growth. Yardi Matrix reported a year-over-year rent growth rate of 0.7%, while Apartment List reported that the national rent growth rate was still in negative territory, at -0.8%.
New Supply Continues as the Culprit
The Apartment List analysts explained that the reason for ongoing slow rent growth is “a robust supply of new inventory hitting the market,” combined with sluggish demand. Furthermore, “despite most large cities seeing prices rise every month, a majority have still seen rents dip over the past twelve months as a whole,” Apartment List said, adding that the ongoing and robust construction pipeline is “expected to deliver a decades-high number of new apartment units in 2024.”
Still, while the national median rent is 3.1% below its peak in August 2022, “it is still 22% higher than it was at the start of 2021,” the Apartment List analysts commented.
Now, for Some Optimism
However, the Yardi Matrix report viewed things a little differently, pointing to “plenty of encouraging signs in the data,” including increased household formation generating ongoing apartment demand. The report noted that more than 72,000 multifamily units were absorbed in Q1 2024, translating to 300,000 per year absorption rates.
Though the quarterly absorption was slightly below average for the last six first quarters, it was “the highest Q1 number since 2021, when absorption hit a record level in the wake of the pandemic,” the Yardi Matrix analysts said.
Yardi Matrix went on to say that demand remained consistent. Though it could take longer to lease up new properties, especially in high-supply areas like the Sun Belt markets, “if demand remains healthy, fundamentals will return to normal after new stock is digested,” the Yardi Matrix report said.
Vacancy Rates Hold Steady
In the vacancy area, Yardi Matrix analysts put occupancy at 94.5% in March, “a rate held since the beginning of the year.” Meanwhile, Apartment List reported vacancies at 6.7% (93.3% occupancy). Apartment List analysts added that vacancy trends are highly local and “have been a key indicator of rapidly evolving conditions in local markets across the U.S. throughout the pandemic.”
- ◦Lease
- ◦Development
