$1,152 1Q 2024
2.9%
92.3% 1Q 2024
-160 BASIS POINTS
4.1% (FEB 2024)
5.9% (FEB 2024)
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In the first quarter of 2024, Cleveland’s apartment market stumbled, with net absorption turning negative. Despite this, Downtown Cleveland remained a key demand hub, with area renters absorbing 30 units. While the first quarter recorded negative absorption, annual demand remained positive. The strongest demand has been in areas with recent additions of Class A units, particularly Downtown Cleveland, which absorbed a total of 419 units.
In the first quarter of 2024, the Cleveland apartment market saw the delivery of 309 new units, following a year of record completions. Currently, 3,241 units remain under construction, with an additional 1,754 units expected to be completed over the next four quarters. Over the past 12 months, East Cleveland led in the number of new units with 1,018 completed.
The elevated number of deliveries to the Cleveland market in 2023 has put downward pressure on occupancies across the metro area. Negative absorption over the past few quarters led to a 140-basis point year-over-year decline in occupancy. Due to the influx of new supply, occupancy among luxury properties is the lowest in the market at 89.4%, while Class B and C properties average around 92.7%.
Looking ahead, occupancy in Cleveland is expected to tighten through the second half of 2024. With a slowing construction pipeline leading to fewer new units in the near term, net absorption is likely to rebound during the historically strong leasing periods of spring and summer.
Average Monthly Mortgage Payment
In the first quarter of 2024, Cleveland’s multifamily market experienced a 2.9% year-over-year increase in average effective rents for new leases, reaching $1,113 per month. This growth outpaced the national average of 0.8% and ranked third in rent performance among major U.S. multifamily markets. By the end of the year, Cleveland is expected to see a 4.1% annual rent increase, driven by stabilizing occupancy rates and a slower pace of new developments.
The most notable rent growth that occurred in Cleveland was located in the desirable Avon/Westlake submarket, which saw a 4.5% increase. More affordable areas like Brooklyn Heights also experienced significant growth, with a 7.5% rise due to limited new supply. With the exception of Southeast Cleveland, all submarkets reported positive year-over-year rent changes.
Average Monthly Rent
After a lull in deal activity for much of 2023, the Cleveland apartment market experienced a rebound in the first quarter of 2024, recording its highest quarterly sales total since 2022. The total deal volume for the quarter reached $55.3 million across two transactions. In recent years, institutional acquisitions were scarce, and the majority of significant deals were driven by private buyers, including developers and private equity firms. While developers continue to be involved in prominent transactions, individual buyers are now increasingly filling the gap.
* Preliminary Data from RCA – Individual transaction $2.5M +
Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.
| Income Assumptions | Value / Unit | Year Change (%) |
|---|---|---|
| Rental Income / Occupied Unit | $1,077.01 | 6.1% |
| Recoverable Expenses / Occupied Unit | $44.23 | 14.1% |
| Other Income / Occupied Unit | $73.51 | 4.9% |
| Total Income / Occupied Unit | $1,194.75 | 6.3% |
| Rental Income | $1,001.28 | 4.7% |
| Recoverable Expenses | $41.12 | 12.6% |
| Other Income | $68.32 | 3.5% |
| Total Income | $1,110.72 | 4.9% |
| Operating Expenses | Value / Unit | Year Change (%) |
|---|---|---|
| Payroll | $122.80 | 6.9% |
| Repairs & Maintenance | $58.80 | 9.1% |
| Leasing | $36.33 | 4.7% |
| General | $27.67 | 5.6% |
| Marketing & Advertising | $11.95 | 19.2% |
| Repairs & Maintenance | $110.81 | 3.7% |
| Cleaning | $21.01 | 6.8% |
| Roads & Grounds | $21.90 | 6.0% |
| General | $67.90 | 2.2% |
| Administrative | $43.74 | 6.3% |
| Security | $6.70 | 20.5% |
| General | $37.04 | 3.9% |
| Management Fees | $47.65 | 2.9% |
| Utilities | $98.64 | 1.3% |
| Electric | $19.76 | -4.9% |
| Gas | $14.69 | -8.3% |
| Water/Sewer | $64.19 | 5.9% |
| Real Estate & Other Taxes | $126.61 | 0.1% |
| Insurance | $30.85 | 16.8% |
| Other Operating Expensees | $2.84 | |
| Total Operating Expense | $595.90 | 4.1% |
| Value / Unit | Year Change (%) | |
| Net Operating Income | $514.82 | 5.9% |
|---|
Cleveland’s multifamily market exhibited impressive rent performance in the first quarter, ranking third among major U.S. multifamily markets. With a shrinking construction pipeline, occupancy is expected to stabilize in the near term. Rent growth is projected to remain strong, with forecasts predicting an annual increase between 4% and 5% by 2025. The market’s 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.
