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Category: Apartments, Multifamily Tags: End of Year

Multifamily End-of-Year Market Report

The multifamily market has experienced three consecutive quarters of solid renter demand. Despite supply still outpacing demand, the country is experiencing the largest construction pipeline since the early 1970s. As a result of an economic slowdown and a lack of entity-level deals, multifamily sales volume was down in 2023. However, the positive is that fundamentals are solid with renter demand and the construction pipeline.



  • National rent growth has decelerated, pulling back from 1.3% at the end of June 2023 to 0.8% at year-end 2023. Midwest and Northeast markets fared the best in 2023, with year-over-year (YOY) rent growth down only marginally.
  • The national vacancy rate increased by more than 200 basis points since its record low, reaching 7.5% at year-end 2023.
  • The substantial increase in development across the Sunbelt has resulted in the nation having nearly one million units currently under construction.
  • Transaction volume in 2023 amounted to $119B, down 61% from the year prior.


Rents | Vacancy

The ongoing supply-demand imbalance throughout the multifamily sector has pushed the national vacancy rate 20 basis points higher over the past 90 days to 7.5%. Vacancies in both Class A and Class B properties have risen over the past eight quarters. Class A properties are experiencing an overabundance of supply swamping demand, while Class A rents fell over the last 90 days. Class B properties are suffering soft demand due to higher prices and economic uncertainty.


Over the last 12 months, markets in the Midwest and Northeast have experienced only slight decreases in YOY rent growth. Northern New Jersey, Cincinnati, Chicago, Indianapolis, and Boston demonstrated the most robust rent growth among these regions. In contrast, Sunbelt markets have witnessed a notable deceleration in rent growth over the past 12 months, with several experiencing negative YOY rent growth. For instance, in Q3 2023, Austin and Atlanta saw rent growth rates of -4.8% and -3.1%, respectively.



There were more than 900,000 units in various stages of completion at the start of Q4. 2023 witnessed a 40-year high in new deliveries, totaling almost 573,000 units, with an additional 443,000 units expected to be delivered in 2024. One market that stands out is Austin, which has delivered more than 21,000 units in the last 12 months, almost the same amount as Atlanta, despite having only half of that market’s inventory.


The current environment of high-interest rates, coupled with a reduction in construction lending, has hindered some developers from advancing with proposed projects. This suggests the onset of a substantial pause in deliveries towards the end of 2024 and into 2025. This pause could provide an opportunity for many overbuilt Sunbelt markets to absorb their existing supply surplus and return to a state of equilibrium more swiftly. Nevertheless, until this occurs, these markets are likely to face significant performance pressures, especially in the Class A segment, where the majority of new supply is priced.


Sales Volume

In 2023, the apartment market maintained its status as the largest commercial real estate investment class despite a 61% decline in deal volume compared to 2022. Year-end volume amounted to $119 billion. Pricing trends have also experienced notable changes. Previously, loan-to-value (LTV) ratios were frequently seen at 70% to 80%, with interest rates ranging from 3% to 3.5%. However, they have now declined to approximately 55% to 65% LTV, accompanied by higher interest rates ranging from the high-5% to mid-6%.


Having a substantial share in the $4.5 trillion commercial real estate mortgage debt, the multifamily sector expects a modest rise in loan maturities in the current year. The projected obligations are $255 billion in 2024 and $243 billion in 2025.



Evolving Tenant Preferences

Today’s tenants seek more than just a place to live; they are looking for a comprehensive living experience. Amenities such as fitness centers, co-working spaces, and pet friendly facilities are becoming increasingly important. Property owners who can cater to the evolving needs of tenants are likely to attract and retain high-quality residents.


Innovation and Technology

Technology is still shaping the multifamily market, and its impact cannot be underestimated. Technology has altered how properties are marketed, maintained, and experienced, from online property search platforms to smart home automation systems. Property owners can gain a competitive advantage in attracting tenants and maximizing operational efficiency by embracing technology.


Sustainability and Green Initiatives

Sustainability has been a prominent concern throughout businesses, including the multifamily market. Tenants are actively seeking eco-friendly living options as they become more aware of the environmental consequences. Property owners might incorporate energy-efficient appliances, green building materials, and recycling initiatives to address these expectations. This not only benefits the environment, but it may also attract environmentally conscious tenants.



As demand drivers change major homebuilders are pivoting their focus to purpose-built, single-family rental homes. These homes are constructed from the ground up for the specific purpose of renting to tenants. Due to increased home prices, higher lending rates, preference for renter flexibility, and new housing standards, this product type has emerged in popularity.

Click here to read the 2022 End of Year Market Report.

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