$1,648 4Q 2023
$1,686 4Q 2024
2.3%
94% 4Q 2023
93.8% 4Q 2024
-20 BASIS POINTS
318.4k UNITS 2023
375.4k UNITS 2024
575.3k UNITS 2023
453.0k UNITS 2024
The multifamily real estate sector has undergone a significant transformation over the last couple of years. In 2022, the sector experienced unprecedented national rent increases, reaching new heights. However, by the end of 2023, the landscape had shifted considerably, with rent growth decelerating to a modest 0.8%. This change was primarily driven by a historic influx of new apartment developments coupled with a decline in demand in the latter half of 2022, exerting downward pressure on occupancy rates. Despite these dynamics at the national level, regional analyses reveal variances in performance, particularly highlighting the Midwest’s resilience in apartment fundamentals for 2023. The region’s affordability, consistent population growth, and measured pace of new construction, in contrast to the explosive growth in the Southeast and Southwest, laid the groundwork for sustained rent increases last year.
Looking ahead to 2024, the national outlook for rent growth is cautiously optimistic, with expectations for it to remain under 1% during the traditionally slower winter leasing period. Nonetheless, a brighter outlook is forecasted, with a projected 25% decrease in new unit completions to approximately 453,000, down from a 40-year peak in 2023. Demand is also anticipated to continue its upward trajectory, bolstered by an 18% increase in net absorption to 375,000 units, contingent upon a stable economy that maintains renter confidence.
The Class B segment, which concluded 2023 with a 1.6% annual rent increase, outperforming the broader U.S. average, is particularly noteworthy. These properties have largely avoided the oversupply challenges plaguing the luxury market, positioning them for potential demand and performance increases. Conversely, the luxury segment may continue to face challenges in achieving positive rent growth due to ongoing supply concerns.
Examining market-specific dynamics more closely reveals a cautiously optimistic forecast for rent growth, with expectations set for all major markets to experience positive rent increases by the end of 2024. This marks a significant turnaround from the 19 markets with at least 50,000 units that experienced negative annual rent growth in the fourth quarter of 2023, notably led by Austin with a -5.2% annual change. While a shift towards expansion is predicted for all major markets by the fourth quarter of 2024, Sun Belt markets, currently burdened by excess supply, may experience slower growth rates compared to their historical norms, indicating a prolonged recovery period in these markets.
It is important to note that these are year-end projections, and markets that were significantly impacted in 2023, such as Austin, Texas, may not see positive year-over-year rent growth until later in 2024. As 2024 unfolds, the narrative is shaping up to be one of rebound and recovery, with the potential for market dynamics to shift from stabilization to recovery as early as the second half of the year. However, the pace of this transition is expected to vary across regions, with the Midwest and Northeast potentially leading in rent growth expansion, while Sun Belt markets may face additional challenges before witnessing a positive growth trajectory.
| Top 50 Markets | Q4 2023 Stabilized Occupancy | Q4 2024 Stabilized Occupancy (f) | Annual Occupancy Change (2024/2023) | Q4 2023 Average Monthly Rent | Q4 2024 Average Monthly Rent (f) | Annual Rent Change (2024/2023) |
|---|---|---|---|---|---|---|
| San Jose | 95.5% | 95.9% | 0.3% | $2,875 | $3,024 | 5.2% |
| San Francisco | 94.3% | 94.4% | 0.1% | $2,963 | $3,109 | 4.9% |
| Oklahoma City | 89.6% | 89.6% | 0.0% | $953 | $992 | 4.1% |
| Norfolk | 94.1% | 94.1% | 0.0% | $1,439 | $1,496 | 4.0% |
| Louisville | 94.7% | 94.4% | -0.2% | $1,127 | $1,171 | 3.8% |
| Cleveland | 92.7% | 92.6% | 0.0% | $1,132 | $1,173 | 3.6% |
| Miami | 96.2% | 96.1% | -0.1% | $2,288 | $2,370 | 3.6% |
| East Bay | 93.7% | 93.7% | 0.0% | $2,338 | $2,416 | 3.3% |
| Baltimore | 93.8% | 93.8% | 0.0% | $1,604 | $1,657 | 3.3% |
| Washington | 94.6% | 94.3% | -0.3% | $2,100 | $2,167 | 3.2% |
| Northern New Jersey | 96.8% | 96.5% | -0.3% | $2,054 | $2,120 | 3.2% |
| Detroit | 92.8% | 92.5% | -0.3% | $1,223 | $1,262 | 3.2% |
| Tucson | 92.2% | 91.8% | -0.4% | $1,124 | $1,159 | 3.1% |
| Orange County | 96.9% | 96.8% | -0.1% | $2,632 | $2,711 | 3.0% |
| Seattle | 94.3% | 94.0% | -0.3% | $1,942 | $1,997 | 2.9% |
| Chicago | 95.1% | 94.9% | -0.3% | $1,688 | $1,735 | 2.8% |
| Sacramento | 94.1% | 93.8% | -0.3% | $1,760 | $1,809 | 2.8% |
| Inland Empire | 94.5% | 94.1% | -0.4% | $1,964 | $2,018 | 2.7% |
| Las Vegas | 91.4% | 91.2% | -0.3% | $1,406 | $1,443 | 2.6% |
| Fort Lauderdale | 94.5% | 94.3% | -0.3% | $2,217 | $2,276 | 2.6% |
| Pittsburgh | 94.6% | 94.2% | -0.3% | $1,276 | $1,309 | 2.6% |
| Cincinnati | 94.4% | 94.0% | -0.4% | $1,205 | $1,235 | 2.5% |
| Boston | 96.1% | 95.8% | -0.3% | $2,730 | $2,798 | 2.5% |
| Memphis | 86.4% | 86.2% | -0.2% | $1,096 | $1,122 | 2.4% |
| Milwaukee | 96.3% | 96.0% | -0.3% | $1,333 | $1,365 | 2.4% |
| Kansas City | 93.2% | 92.9% | -0.3% | $1,234 | $1,263 | 2.3% |
| Columbus | 93.9% | 93.5% | -0.3% | $1,238 | $1,266 | 2.3% |
| New York | 97.9% | 97.9% | 0.0% | $3,062 | $3,130 | 2.2% |
| Nashville | 92.7% | 92.5% | -0.2% | $1,595 | $1,630 | 2.2% |
| Los Angeles | 95.5% | 95.5% | 0.0% | $2,209 | $2,258 | 2.2% |
| Saint Louis | 91.2% | 90.8% | -0.3% | $1,176 | $1,201 | 2.2% |
| Tampa | 93.4% | 93.1% | -0.3% | $1,731 | $1,767 | 2.1% |
| Indianapolis | 92.0% | 91.7% | -0.3% | $1,213 | $1,238 | 2.1% |
| Portland | 94.3% | 94.0% | -0.3% | $1,573 | $1,605 | 2.0% |
| Richmond | 93.0% | 92.7% | -0.3% | $1,426 | $1,455 | 2.0% |
| Denver | 94.1% | 93.8% | -0.3% | $1,794 | $1,826 | 1.8% |
| Philadelphia | 94.9% | 94.6% | -0.3% | $1,680 | $1,709 | 1.8% |
| San Diego | 95.9% | 95.4% | -0.5% | $2,379 | $2,420 | 1.7% |
| Minneapolis | 94.6% | 94.2% | -0.3% | $1,442 | $1,466 | 1.7% |
| Phoenix | 91.9% | 91.6% | -0.3% | $1,529 | $1,552 | 1.5% |
| Salt Lake City | 93.4% | 93.1% | -0.3% | $1,540 | $1,560 | 1.3% |
| Jacksonville | 90.9% | 90.6% | -0.3% | $1,438 | $1,456 | 1.2% |
| San Antonio | 90.2% | 89.7% | -0.4% | $1,226 | $1,241 | 1.2% |
| Orlando | 93.2% | 92.8% | -0.4% | $1,726 | $1,744 | 1.1% |
| Houston | 90.9% | 90.6% | -0.3% | $1,301 | $1,314 | 1.0% |
| Dallas-Fort Worth | 91.8% | 91.4% | -0.4% | $1,493 | $1,505 | 0.8% |
| Raleigh | 92.6% | 92.3% | -0.3% | $1,488 | $1,499 | 0.8% |
| Austin | 91.3% | 90.8% | -0.5% | $1,561 | $1,571 | 0.6% |
| Atlanta | 90.7% | 90.3% | -0.4% | $1,577 | $1,582 | 0.3% |
| Charlotte | 92.5% | 92.2% | -0.3% | $1,532 | $1,536 | 0.2% |
4Q 2023 Unit Inventory
Number of Units Under Construction
| Top 50 Markets | Unit Inventory: 4Q 2023 | Units Under Construction | % of Existing Inventory UC |
|---|---|---|---|
| Tucson | 83,511 | 2,056 | 2% |
| Louisville | 89,737 | 4,869 | 5% |
| Salt Lake City | 91,437 | 8,535 | 9% |
| Oklahoma City | 97,236 | 3,429 | 4% |
| Memphis | 99,284 | 3,124 | 3% |
| Pittsburgh | 104,178 | 1,974 | 2% |
| Richmond | 104,217 | 4,925 | 5% |
| Milwaukee | 113,361 | 3,682 | 3% |
| Jacksonville | 114,670 | 10,477 | 9% |
| Norfolk | 122,456 | 3,002 | 2% |
| Raleigh | 124,470 | 13,820 | 11% |
| Cleveland | 134,356 | 3,607 | 3% |
| Fort Lauderdale | 136,279 | 10,180 | 7% |
| Cincinnati | 139,628 | 4,410 | 3% |
| Sacramento | 140,521 | 3,455 | 2% |
| Saint Louis | 146,117 | 3,007 | 2% |
| San Jose | 156,826 | 7,908 | 5% |
| Nashville | 162,682 | 19,660 | 12% |
| Northern New Jersey | 164,003 | 13,866 | 8% |
| Indianapolis | 166,975 | 6,913 | 4% |
| Inland Empire | 173,024 | 5,359 | 3% |
| Kansas City | 174,283 | 7,747 | 4% |
| San Francisco | 179,882 | 4,190 | 2% |
| Las Vegas | 185,665 | 6,881 | 4% |
| Miami | 187,121 | 27,458 | 15% |
| East Bay | 189,715 | 4,309 | 2% |
| Baltimore | 209,300 | 5,066 | 2% |
| Orlando | 211,770 | 20,626 | 10% |
| Columbus | 212,436 | 8,656 | 4% |
| San Antonio | 213,840 | 18,081 | 8% |
| Charlotte | 216,200 | 31,243 | 14% |
| Tampa | 219,589 | 17,275 | 8% |
| Portland | 226,168 | 8,312 | 4% |
| Detroit | 229,587 | 4,758 | 2% |
| Orange County | 250,392 | 6,868 | 3% |
| Boston | 271,634 | 12,701 | 5% |
| Minneapolis | 273,456 | 12,699 | 5% |
| San Diego | 277,226 | 7,658 | 3% |
| Austin | 286,309 | 41,863 | 15% |
| Denver | 293,652 | 27,852 | 9% |
| Philadelphia | 357,480 | 18,901 | 5% |
| Phoenix | 380,737 | 35,649 | 9% |
| Seattle | 381,924 | 24,099 | 6% |
| Atlanta | 504,807 | 30,843 | 6% |
| Chicago | 556,371 | 10,995 | 2% |
| Washington | 565,113 | 29,750 | 5% |
| Houston | 700,601 | 25,140 | 4% |
| Dallas-Fort Worth | 852,965 | 55,488 | 7% |
| Los Angeles | 1,035,478 | 23,651 | 2% |
| New York | 1,546,338 | 67,510 | 4% |
The apartment market once again emerged as the premier class for commercial real estate investments. Despite a significant 61% reduction in transaction volume compared to the previous year, the sector maintained its dominance. This downturn, along with a dip in property values within the apartment sector, may raise concerns among investors. However, a closer look at the data sets reveals a more balanced observation of the current market.
Reflecting on the past two years, the apartment sector experienced an unprecedented surge in transaction activity, with an annual average investment of $332 billion in 2021 and 2022. This figure starkly surpasses the sector’s former peak in 2019, which saw $195 billion in transactions. The activity in 2021 and 2022 exceeded the previous record by 70%, driven by the historically low interest rates and money printing that occurred in the early days of the pandemic Covid-19 pandemic to combat a major economic depression.
Prior to the challenges imposed by the global health crisis, the apartment sector was already drawing significant interest from investors, driven by the dual pressures of potential interest rate hikes and the appeal of investments that necessitate limited capital outlays. This trend, when combined with the search for assets capable of delivering consistent returns amidst the uncertainties brought about by the pandemic, set the stage for a notable surge in investor enthusiasm. The years 2021 and 2022, marked by unprecedentedly low borrowing costs, further amplified this interest, propelling investment activities to unprecedented levels.
Despite the shift in financing conditions in 2023, with the lower cost of financing no longer in play, the apartment sector continues to hold attractive elements for investors, although it may not reach the peak levels of recent years. The observed decrease in transaction volumes might initially appear concerning, reminiscent of the steep declines witnessed during the 2008 and 2009 Global Financial Crisis. However, it is crucial to interpret this decline within its proper context; a 60% reduction from historical norms to the depths of the financial crisis carries a different connotation compared to a retraction from peak levels to transaction volumes that are more in line with those seen in the mid-2010s.
Dallas and Atlanta stood out as the top performers on an individual market basis, despite facing declines in transaction volumes of 59% and 64% respectively, on a year-over-year basis. Following closely were Los Angeles, Chicago, and the New York Boroughs, completing the top 5. Chicago, in particular, made a significant leap from 11th place in 2022 to 4th in 2023, with a relatively modest transaction volume decrease of 37% compared to other markets. Conversely, Orlando and Charlotte witnessed substantial downturns, sliding to the 16th and 17th spots, respectively. The decline in these markets was pronounced, with transaction volumes plummeting by more than 70% year-over-year.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
P=Preliminary
156.14M 2023
158.17M 2024
3.6% 2023
4.1% 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.
According to projections by Goldman Sachs Research, the US economy is set to continue its healthy expansion, albeit at a marginally reduced pace, with an anticipated growth of 2.1% in the US GDP for the full year. Goldman Sachs Research highlights a notably low 15% chance of a recession in the US over the next year, suggesting that fears of an economic slump may be exaggerated.
The primary engine for economic growth in 2024 is expected to be strong consumer spending, underpinned by a 3% increase in real disposable income. This is expected to be driven by consistent employment growth, approximately 1% real growth in wages, and inflation rates aligning with the Federal Reserve’s objectives. On the other hand, a slowdown is projected in business investment, following a surge last year propelled by incentives from legislative measures like the CHIPS Act and the Inflation Reduction Act. Nonetheless, heightened investments in artificial intelligence and a decrease in concerns about a recession could enhance the confidence of business leaders, leading to a rise in business investment for 2024. Regarding fiscal policy, federal government expenditure is anticipated to stay steady, complemented by a modest 0.5% uptick in spending by state and local governments.
Labor market conditions are expected to remain resilient, shifting towards a more moderate job growth rate of about 100,000 jobs per month in the second half of 2024. The unemployment rate is forecasted to hover in the high 3% to low 4% range, supported by a low rate of layoffs and job vacancies maintaining levels above those recorded in 2019, which was one of the strongest labor markets in US history.
