$1,225 2Q 2024
2.3%
91.7% 2Q 2024
-30 BASIS POINTS
1,074 [YTD: 1,714]
14 [YTD: 713]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In the first half of the year, renter demand in St. Louis has surged, buoyed by improved consumer sentiment. Absorption during this period reached approximately 1,714 units, more than doubling the pace of demand compared to the same period last year. This resurgence in rental activity allowed absorption to surpass the number of new units introduced in the first two quarters, positioning 2024 for a robust close. Notably, renter demand in the second quarter was heavily concentrated in the submarkets of St. Charles County, Downtown St. Louis, Mid County, and West County, which collectively accounted for nearly 70% of the quarter’s demand.
Amid a tightening interest rate environment that has curtailed new developments, the construction pipeline has fallen to its lowest level in four years. With 2024 set to mark the second consecutive year of declining deliveries, the pace has notably slowed since peaking at 4,800 units in 2022; currently, just over 2,700 units are under construction. This reduction is helping alleviate the supply-side pressures that have weighed on the market’s occupancy rates for nearly three years. The majority of the units currently under construction are concentrated in the Mid County submarket, where developers are actively working on 1,023 units.
After a dip in absorption in 2022 amid peaking inflation, renter demand in St. Louis has rebounded significantly over the past year, particularly in the first half of 2024. Absorption soared to just over 1,714 units, marking a 140% increase from the same period a year earlier. The second quarter of 2024 witnessed the highest quarterly absorption since the first half of 2021 and ranked among the highest levels in the past decade. This surge in demand during the second quarter ended a year-long trend where supply had outstripped demand, contributing to a 30-basis point improvement in the average occupancy rate from the first to the second quarter of 2024. Renters were especially active in St. Charles, helping to lift the occupancy rate above 95% at the end of the second quarter. Looking ahead, if the current economic conditions persist, St. Louis is expected to see further improvements in market fundamentals through the end of 2025, with the average occupancy rate projected to reach the upper 92% range as the pipeline diminishes.
Saint Louis has consistently outperformed many similarly sized markets in rent growth, routinely ranking in the top 15 among the 50 largest multifamily markets over the last six quarters. As of the end of the second quarter of 2024, the Saint Louis market recorded a 2.3% annual increase in average rents, securing the 14th highest ranking among these major markets. A closer examination of rental trends in the Saint Louis area reveals that mid-range properties are showing strong performance, with an average rental rate increase of 3.4% in the year ending June 2024. In contrast, luxury properties, which are more impacted by new construction, experienced a more modest increase of 1.1% over the same period. Notably, St. Charles County, one of Saint Louis’ primary submarkets, experienced the largest annual rental increase, with rents rising 3.9% over the previous year as of the end of Q2 2024.
Average Monthly Mortgage Payment
Average Monthly Rent
As of mid-2024, the total value of individual conventional multifamily transactions in Saint Louis reached approximately $324.6 million, marking a modest 7% decrease from the same period in 2023. The number of transactions slightly declined, with 19 deals completed so far in 2024. Institutional capital has maintained a cautious approach, representing about 14% of the buyer pool in the Saint Louis market this year. Private buyers, historically the most active in the market, continue to dominate, constituting the vast majority of transactions this year.
From a historical perspective, private buyers have consistently been the most prevalent, accounting for approximately 80% of the buyer pool over the last decade. Institutional buyers represent the next significant group. While public REITs or cross-border capital investors occasionally participate in the Saint Louis market, such instances are rare.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* 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
|
|---|---|---|---|---|---|---|
|
0.3%
|
-0.3%
|
-0.8%
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-0.5%
|
1.3%
|
0.3%
|
-0.3%
|
The 65-74 age group is the fastest-growing renter demographic in the Saint Louis metro area, showing a notable 1.3% increase from 2019 to 2022. This upward trend highlights a rising demand for rental housing that caters to an aging population seeking proximity to parks, lifestyle amenities like golf courses, and accessible healthcare options.
Saint Louis is rebounding from a brief period where supply pressures impacted occupancy rates. The second quarter marked a pivotal shift, being the first in a year-long period where demand outstripped supply. As the pace of new unit deliveries slows, occupancy is expected to gradually increase. Additionally, half of Saint Louis’ 20 submarkets are showing robust performance, with occupancy rates surpassing 94%.
The city is also experiencing a surge in commercial construction activity, particularly in the downtown area, which is expected to boost housing demand. A significant highlight is the opening of CITYPARK Stadium and the inaugural season of St. Louis City SC in Major League Soccer, both of which are set to bring renewed energy and attention to the city. Moreover, the extensive $210 million revamp of America’s Center is transforming St. Louis into a premier convention hub and tourist destination. The economic landscape is further strengthened by significant corporate investments, including American Foods and Wieland Rolled Products’ $500 million project in East Alton, which promise to enhance job prospects and economic vitality.
Peering ahead, the foundation of strong market fundamentals paired with steady demand paints a picture of stability for the St. Louis apartment market in the long run, despite the ebbs and flows of market conditions.
