USA National Multifamily Market Report as of October 1, 2023

[Manuel Angeles]

Greetings,

Here is an update on the current National Commercial Multifamily Real Estate Market in The United States of America:

The multifamily trend of the past six quarters has been one of supply outpacing demand, and the second quarter of 2023 held to that script. More than 105,000 units were absorbed in the quarter, a number not seen since 21Q3, as demand began to recover from its weak showing in the prior six quarters. While a positive sign for apartment demand, it was not enough to fill the 145,000 units delivered during the quarter. Thus, rent growth nationally decelerated once again, going from 2.9% at the end of March to 0.9%.

Midwest and Northeast markets fared the best over the past 12 months, with year-over-year rent growth down only marginally. At the end of the second quarter of 2023, the top five rent growth leaders are Cincinnati, Northern New Jersey, Columbus, Indianapolis, and Chicago reflecting the strength and balance currently seen in more mature markets, with rent growth ranging from 3.4% to 4.2%.

Sun Belt markets on the other hand have seen significant slowing in rent growth over the past 12 months. Austin and Las Vegas anchor the bottom of the rent growth pack with year-over-year rent growth of -4.0 and -2.8%% respectively. No major Sun Belt markets currently have rent growth above the national average. The slowing of rent growth will continue for the rest of 2023, as the risk of recession hangs over the economy and many markets are experiencing over-supply conditions.

Nationwide, more than 1 million multifamily units are under construction, the largest pipeline since the early 1970s. Current projections show 554,000 units will be delivered this year. Many markets are at risk of oversupply, especially in the Sun Belt, reflecting the significant acceleration of development activity in that region responding to strong in-migration during the pandemic. Since 2019, deliveries in Sun Belt markets have increased 64% while they are up by only 8% in the rest of the nation.

The supply/demand imbalance has pushed the national vacancy rate up over 200 basis points from an all-time low of 4.7% in the third quarter of 2021 to 7.0% midway through 2023. CoStar's current forecast pegs the national vacancy rate to finish this year in the mid-7% range, which would be 100 basis points higher than prepandemic levels. Second quarter absorption saw strong demand in 3 Star priced units emerging for the first time since 2021. Higher rents and soaring inflation have burdened mid-priced renter households at the beginning of 2022 and dampened potential household formation. The rise in second quarter 3-Star absorption suggests that mid-priced assets could lead the beginning of a recovery for these institutional quality assets.

Here are several graphs illustrating the current national commercial multifamily market in The United States of America:

Here is the full USA multifamily market report for you to review: https://d2saw6je89goi1.cloudfront.net/uploads/digital_asset/file/1170832/United_States-MultiFamily-National-2023-10-02_compressed.pdf

Data includes: Sale price per unit distribution, cap rate distribution, cumulative sales volume by year, months to sale, recent significant sales, vacancy rates, market rent per unit, construction deliveries/demolitions, economy, job growth. population growth, and sub-market activity.