$1,177 2Q 2024
3.2%
92.3% 2Q 2024
-130 BASIS POINTS
683 [YTD: 804]
436 [YTD: 834]
Cleveland’s apartment market boasts robust rent growth, exceeding the national average with a 3.2% year-over-year increase. This positions Cleveland as the sixth-highest performer among major U.S. markets.
Rents are projected to continue their upward trajectory, with an anticipated 4.8% annual increase by year-end. This growth is fueled by stabilizing occupancy rates, resurgent demand, and a slowdown in new construction.
Major investments like the Cleveland Clinic’s Innovation District expansion ($565 million) and Sherwin-Williams’ new HQ ($600 million) will create jobs and fuel apartment demand in the coming years, further strengthening Cleveland’s economy.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In 2024, the Cleveland multifamily market has shown a marked improvement in net absorption, reversing the trend from two consecutive quarters of negative net absorption at the end of 2023. The demand within the market has displayed a distinct split across property classes, with higher quality assets attracting a significantly larger share of demand compared to mid-range and workforce housing. This suggests that lower-income renters in Cleveland are becoming disproportionately impacted by inflation. On a submarket level, all areas recorded positive absorption in the second quarter of 2024, notably with Downtown Cleveland leading by absorbing over 300 units.
The pace of construction is decelerating, as groundbreaking on new projects has slowed in the Cleveland market. Projections for 2024 indicate a 21% reduction in annual deliveries to 1,900 units, with an anticipated further slowdown of 30% in 2025. Over the past year, the bulk of these deliveries were concentrated in the East Cleveland submarket, particularly in the University Circle neighborhood, which accounted for over 38% of the market wide deliveries. This area remains a key hub of development activity, bolstered by major employers such as Cleveland Clinic, University Hospitals, and Case Western Reserve University.
Cleveland’s apartment market is on the path to recovery, though it continues to navigate challenges stemming from a significant expansion of inventory in 2023. Over the past 12 months, an influx of new units caused occupancy rates to drop by 1.3% year-over-year. Despite this, signs of recovery are emerging. For the first time in ten quarters, demand in the second quarter exceeded new completions. While eight of Cleveland’s ten submarkets experienced annual declines in average occupancy rates, there were notable exceptions. The submarkets of Northeast Cleveland and Southeast Cleveland defied this trend, recording increases in occupancy of 30 and 80 basis points, respectively, highlighting localized strengths within the broader market.
Cleveland’s apartment market is outpacing national trends with significant rent growth. In Q2 2024, the average rent for new leases rose by 3.2% year-over-year, reaching $1,177, which not only exceeded the national average increase but also positions Cleveland sixth among major U.S. multifamily markets. This upward trend is anticipated to continue, with rents expected to climb by 4.8% by the end of the year. This growth is supported by stabilizing occupancy rates and a deceleration in new construction. Notably, desirable areas such as South and Southeast Cleveland recorded some of the highest rent increases, at 6.7% to 6.8%, respectively.
Average Monthly Mortgage Payment
Average Monthly Rent
After a slowdown in deal activity throughout much of 2023, the Cleveland multifamily market witnessed a significant resurgence in the first half of 2024. Transaction volume for individual asset trades of conventional multifamily properties reached $248.4 million, spread across six transactions. Notably, this increase was not driven by a single large deal but by three separate transactions, each averaging around $55 million, involving higher quality suburban assets. Consistent with trends from previous years, private investors continue to dominate the buyer landscape, maintaining control of at least 95% of the buyer pool since 2024.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
-0.4%
|
-0.4%
|
-1.1%
|
-0.2%
|
1.4%
|
0.7%
|
0.0%
|
The population of older renters has been expanding in Cleveland. Those aged 65-74 represent the fastest-growing renter demographic, with a 1.4% increase from pre-pandemic 2019 to 2022. This trend suggests an increasing demand for rental housing that caters to aging residents.
Cleveland’s multifamily market exhibited impressive rent performance in the second quarter of 2024, ranking sixth among major U.S. multifamily markets. With a shrinking construction pipeline, occupancy is expected to further stabilize in the near term. Rent growth is projected to remain strong, with forecasts predicting an annual increase between 5% and 6% by 2025. Rental demand will be bolstered by ongoing capital investments. The healthcare sector remains a pillar of Cleveland’s economy, with Cleveland Clinic and University Hospitals as the metro’s leading employers. Cleveland Clinic has pledged to create thousands of high-skill jobs by late 2028 as part of the $565 million Innovation District, which includes a new global center for pathogen research and human health. This expansion is supported by Ohio’s 15-year job creation tax credit. In addition, Fortune 500 company Sherwin-Williams is set to invest $600 million in a new headquarters and research facility in northeast Ohio, employing over 3,500 people. With continued growth in the education and health services sectors, Cleveland is emerging as a hub for job opportunities and economic expansion.
