Multifamily Market Report | Review & Outlook
2024 Multifamily Market Report
Southeast | Review + Outlook
Atlanta, GA
Experiencing recent relief, Atlanta closed Q3 2023 with the strongest positive absorption in nearly two years. The positive absorption was accounted for by high-end properties (Class A), while negative absorption was seen for low-to-moderate income properties (Class C). Atlanta has 32,000 units under construction, where nearly three-quarters of the construction is Class A. Properties under construction represent 6.5% of multifamily inventory, a jump from ~14,000 units delivered annually since 2019. Two years ago, Atlanta experienced a record-low vacancy rate of 5%, but with the new construction coming to market, vacancy rates have climbed to 11.3%. Rents are down 3% across the market, and submarkets such as Buckhead, Midtown, and West Midtown are seeing even steeper declines. Click here to view the latest Atlanta multifamily market report.
Nashville, TN
Nashville’s multifamily market is amid a record breaking era, with 13,000 units anticipated to be delivered by 2024. In the previous 15 years, the highest number of units delivered never topped 10,000. Demand in Nashville is segmented as 85% of the overwhelming demand falls within the Class A cohort. Since the beginning of 2020, more than 20,000 units have been absorbed on a net basis within the luxury asset class.
Despite the increased absorption of higher-rate units, asking rents declined in 2023 for the first time since 2010. In fact, during Q3 2023, asking rents declined by 2%, and they are expected to continue to fall in early 2024. Vacancy rates are at 20-year highs at 10.9% and are expected to grow in the coming quarters. However, 40% of Nashville’s existing inventory has been delivered since the beginning of 2020 alone. Click here to view the latest Nashville multifamily market report.
Lexington, KY
Lexington’s multifamily market is healthy heading into 2024. Ahead of the historical average, annual net absorption totaled 1,000 units, while demand remains steady. An influx of Class A apartments is pushing Lexington’s vacancy rates up, however, the affordability of Lexington’s Class C properties is keeping absorption high. In addition, the Lexington submarket, Jessamine County, represented 14% of market-wide net absorption in 2023. Vacancy rates in Lexington are at 6.2%, compared to the national average of 7.1%. Also, rent growth in Lexington is at 5.2%, compared to the 10-year Lexington average of 4.1%. This outperforms the National Index of 0.7%, which can be attributed to limited deliveries and balanced population growth. As high-interest rates widen, the gap between buyer and seller expectations on property valuations has increased and as such, Lexington will continue to see low investment activity. Most of the existing investment activity in Lexington is trending towards Class B/C assets of less than 10 units.
Gulf Markets | Review & Outlook
Birmingham, AL
A decline in demand and above-average deliveries have resulted in below-average performance for the Birmingham market. In 2023, Birmingham delivered over 1,600 units, slightly above the 10-year annual average. New inventory was primarily delivered to Downtown Birmingham, the Lakeshore submarket, and Shelby County. Due to the dip in demand and higher deliveries, Birmingham is experiencing increased average vacancy rates of 10.6%. Still in the pipeline, the market has 2,700 units under construction, which will likely lead to continued upward pressure on Birmingham’s vacancy rate in the coming quarters. Rents in Birmingham have increased 1.2% since Q3 2023, a pace below the national average. Birmingham’s average asking rent is $1,200 per month, which is on par with those in Huntsville, while rents remain lower in the Mobile and Montgomery markets. In addition, multifamily sales in Birmingham totaled $139 million 2023, far below the market’s historical annual average. While the decline in sales is in line with national trends, the market price per unit ($120,000/unit) has declined, and cap rates have increased by about 1% on average.
Jacksonville, FL
Jacksonville’s multifamily market has felt the impact of delivering over 8,000 units in 2023 as developers have slowed breaking ground on construction projects. There are 10,000 units under construction at the moment, which is an inventory expansion of 9.0%. Comparing the number of new units to overall inventory, Jacksonville ranked second in 2022 among the top 10 U.S. markets for deliveries, causing vacancies to rise to 13% in 2023, a 4% increase from the previous year. This short term oversupply is expected to resolve itself as Jacksonville is one of the fastest growing markets in the U.S., growing at 1.2% in the last 12 months.
Investment sales in Jacksonville have declined recently due to a heavy amount of deliveries and negative rent growth mixed with a high interest rates environment. Total transaction volume is down over the last year totaling $813 million, compared to the prior year of $2.7 million. We see this trend resolving itself by Q2 2025 due to the resilient growth of the market and the market moving more towards an equilibrium. Click here to view the latest Jacksonville multifamily market report.
Fort Lauderdale, FL
Fort Lauderdale’s multifamily market is currently under pressure due to slow population growth and a high supply pipeline. While annual apartment absorption reached 2,000 units by early Q4 2023, this is below the five-year average of 3,300 units. Despite outperforming the U.S. average in demand growth from Q4 2019 to Q1 2022, the pace has slowed since mid-2022 and continued in 2023. A record 6,700 units began construction in 2022, but only 1,600 units were started in 2023. Over 5,000 units are expected to be completed in the next two years, significantly exceeding the historical average.
Despite these developments, vacancy rates should stay below the U.S. average until later this year, driven by new, higher-income renters and those moving from the single-family market. However, the growth in luxury apartment inventory will likely suppress rent growth, with vacancies expected to rise above 9% by 2025. Fort Lauderdale ranks fifth in Florida for its apartment inventory pipeline, at 7.6%. Click here to view the latest Fort Lauderdale multifamily market report.
Tampa, FL
With over 215,000 total units, Tampa is Florida’s largest multifamily market. Tampa’s construction pipeline is significant, with 17,995 units under construction. These units are expected to increase the market’s inventory by 8.3%, which is significantly higher than the national average growth rate of 5.1%. Cap rates have been steadily rising, averaging 5.1%, and are expected to continue to increase through the end of 2024. Tampa is experiencing a supply and demand imbalance, which has caused an incline in vacancy rates, reaching an average of 8.2%. The market has not seen this high of a vacancy rate in over a decade.
Tampa has delivered 7,032 units since Q3 2022, but has only recorded 4,621 units of absorption. The majority of absorption occurred in 2023, with 3,800 units absorbed through the end of Q3 2023. Since more units have come online over the past year, the market has witnessed a slowdown in asking rent growth. Asking rent losses have been most apparent in submarkets like Southeast Tampa and Pasco County, where these areas also lead in the new multifamily construction and consistent inflow of new units.
Numerically, asking rents have changed -0.7% year-over-year. Investment sales of multifamily assets in Tampa have been muted in 2023. In total, $1 billion was traded in 2023, down significantly from 2022, where nearly $4.5 billion was recorded. Selling multifamily properties in Tampa has been challenging as buyers are underwriting lower rent growth assumptions and dealing with significantly higher debt costs. Despite market obstacles, investment activity quickly picked up in Q3 2023 with $850 million in total sales volume, fueled by several transactions over $50 million, split between institutional and private buyers.
Midwest | Review & Outlook
Cleveland, OH
An elevated level of deliveries and deceleration of demand is weighing the Cleveland multifamily market down. A total of 2,174 units have been delivered within 2023, and only 692 units have been absorbed. Downtown Cleveland accounted for 60% of deliveries in the market in 2023. There is an influx of Class A properties, but demand resides in Class B & C assets due to their affordability and national economic challenges. Rent in Cleveland is 34% below the national average at about $1,130 per month. The Cleveland market is parallel to what the country is seeing in terms of low investment activity. By midyear of 2023, Cleveland had traded only 40 assets ($110 million), 38% below the average number of mid-year deals over the past five years.
Chicago, IL
Chicago’s multifamily market is stable, with a positive outlook for the near future. Since Q3 2022, approximately 7,300 units were absorbed, well over the annual net absorption average of 4,200. The two strongest submarkets, Downtown Chicago and North Lakefront, accounted for more than 40% of Chicago’s year-over-year absorption gains. In total, Chicago delivered 9,200 units throughout 2023, and one of the largest multifamily projects contained over 800 units.
Chicago has an astounding 5.5% vacancy rate, which is below average for the market, and above average rent growth at 2.8%. Out of the top 45 markets in size (over 100,000 units), Chicago’s rent growth was only outpaced by Cincinnati and Northern New Jersey, each posting 3.5% rent growth year-over-year at the beginning of Q4 2023. Investors choose Chicago due to its overall stability as one of the largest metros in the nation. Over the last 12 months, sales volume in Chicago was $4.2 billion, almost double the historical average of $2.8 billion. Click here to view the latest Chicago multifamily market report.
Minneapolis, MN
The Minneapolis multifamily market recorded its third-strongest quarter of net absorption in Q2 2023 and tripled the three-year pre-pandemic average. High absorption rates have occurred in Minneapolis due to its flourishing labor market and nation-leading market-rate apartment affordability despite rising interest rates and recession fears around the country. In the previous twelve months, Minneapolis delivered 8,917 units and saw 8,207 units absorbed. Most of the demand for multifamily housing originates from the suburbs, but Minneapolis continues to post record-setting years of net deliveries that include the eighth-highest cumulative three-year inventory expansion nationally.
Roughly 13,000 units are currently underway in Minneapolis, accounting for 4.9% of the market’s existing inventory. However, the Twin Cities entered the second half of 2023 with the seventh-highest vacancy rate expansion relative to its 2017 to 2019 average. In addition, Minneapolis’ supply and demand imbalance has weighed on landlords’ ability to push rents, leading to annual rent growth of 1.5%. Click here to view the latest Minneapolis multifamily market report.
Southwest | Review & Outlook
Denver, CO
The Denver multifamily market continues to experience a downshift in apartment activity, quite the turn of events after the explosive growth over the past two years. During the first half of 2023, absorption registered about 3,400 units, down significantly from the 6,500 units absorbed in the first half of 2022 and the 8,300 units absorbed in the first half of 2021. In 2023, Denver delivered 10,845 units, and there are roughly 31,000 units still under construction, a record high. Denver’s multifamily construction is one of the most aggressive supply lines in the country.
About 25% of Denver’s construction is located in Downtown Denver, and 70% of said construction will be within the luxury category. Downtown Denver’s inventory will grow by 10.7% when all construction is complete. Despite the rising construction of Class A properties, demand in Denver is seen from lower- to middle-income households as they seek more affordable housing options. In the past year, vacancy rates have increased by 1.2% to 7.9%. Multifamily sales in Denver have been impacted negatively due to higher interest rates, discouraging both buyers and sellers from executing deals. In 2023, Denver had a total sales volume of $2.7 billion, lagging behind the market’s annual five-year average of $5.9 billion. Click here to view the latest Denver multifamily market report.
Phoenix, AZ
Phoenix’s multifamily demand is moderating as high inflation and economic uncertainty stall the launch of new renter households. Like the majority of the country, there is an imbalance of supply and demand, and Phoenix’s overwhelming construction pipeline is no different. Phoenix looks to expand inventory by 8.6%, with an estimated 33,000 units underway. Downtown Phoenix accounts for 15% of inventory, where dramatic revitalization is occurring and attracting young professionals and students.
The Phoenix skyline is being reshaped with the emergence of new luxury high rise apartments. Another Phoenix submarket, Tempe, has the potential to attract new renters due to the presence of Arizona State University and its 57,000+ students. Sales in the Phoenix multifamily market are modest at best. The market saw its weakest sales quarter in Q2 2023 since 2016 from the $1.2 billion traded properties. Cap rates climbed 125 to 150 basis points since bottoming out in early 2022, and property values have no sign of strengthening in the next 6 to 12 months. Despite an uncertain economy, buyers are still optimistic in Phoenix as they look to the long-term outlook of robust demographics coupled with strong expansion fundamentals. Click here to view the latest Phoenix multifamily market report.
Northeast | Review & Outlook
New Jersey, NJ
Northern New Jersey is breaking historical averages as hundreds of new luxury units flood the market, and the metro sees elevated demand. The market continues to have long-term demographic trends in place to support the eventual absorption of new stock. Specifically, Northern New Jersey’s construction pipeline is within the country’s top 20 largest metros (100,000+ units), reporting 14,000 units underway or 8.9% of existing inventory. However, Northern New Jersey is prepared for stability with vacancy of 4.6% and annual rent growth at almost 4%. In addition, local operators have commented that the market remains bullish on the metro due to high population density and above-average incomes. The first three quarters of 2023 unveiled a significant slowdown for multifamily sales in Northern New Jersey, with just $266 million traded. Comparatively, $1.3 billion was traded in 2022, representing a 73% year-over-year drop. In addition, prices have dropped 24% year-over-year as the average price paid per unit as of Q4 2023 stands at $166,000.
New York, NY
New York’s multifamily market remains one of the tightest U.S. markets, with at least 100,000 units. Many renters are competing for a limited number of units, and vacancy rates are at a historic low of 2.5%. There are about 67,000 units under construction, representing 4.3% of New York’s existing inventory, a percentage that is below the national average of 5.1%. The construction is taking place in neighborhoods that have been steadily adding new units over the past five years, such as Long Island City and Brooklyn. However, there has also been recent construction activity in the Bronx and Westchester County due to rising construction costs and increased competition, as these neighborhoods have needed meaningful inventory additions over the past decade.
Due to tight vacancy levels, owners continue to push rents upward, averaging a 2.1% rent growth throughout 2023. New York multifamily sales were well above annual long-term historical averages of $11.7 billion in 2022 as more than $14 billion traded. However, in 2023, New York’s sales volume was among the lowest over the past decade despite Brooklyn and Manhattan neighborhoods’ consistent demand. New York City’s retail, dining, and hospitality sectors improved through 2023 as visitor foot traffic trended upward. Still, the market remains elevated compared to national averages of unemployment rates, sitting at 5.4%. Click here to view the latest New York multifamily market report.
Texas | Review & Outlook
Austin, TX
Although the Austin multifamily market sees rebounding numbers in terms of renter demand, the influx of new completions is creating an imbalance and disrupting market fundamentals. Austin is set to deliver the highest number of multifamily units ever recorded in a single year, with 20,000 units in 2023. The anticipated net absorption for 2023 was 12,500 units, but the market saw a slightly lower net absorption of 9,213 units. This has caused Austin’s vacancy rates to climb to the fourth highest among major U.S. markets, currently sitting at 11.7%. The gap between the units absorbed and delivered is disrupting the Austin multifamily market.
Despite this imbalance, Austin exceeds the absorption numbers of pre-pandemic averages of 8,400 units and has outpaced the 10-year average. This growth can be accounted for by the affordability, accessibility, employment opportunities, and increasing amenities of Austin’s suburban areas, where populations are rising. Between mid-2021 and 2022, Williamson and Hays County, the two largest suburban counties, saw their populations grow by 4% and 5%, respectively. Click here to view the Austin multifamily market report.
Dallas-Fort Worth, TX
The Dallas-Fort Worth multifamily market is recovering from elevated economic uncertainty caused by inflation, but demand remains present. During the first half of 2023, net absorption recorded 9,040 units, on par with average levels from 2016 and 2017 but below levels reported in 2018 and 2019 when the market experienced net absorption above 20,000 units. In hopes that net absorption will pick up, vacancy rates are expected to decrease. In 2023, vacancy rates increased to 9.4%, much higher than the 5.9% vacancy rate in mid2021. Dallas-Fort Worth expects that demand from high quality suburban submarkets such as Frisco/Prosper, Denton, and Allen/McKinney will continue to remain positive from the strong population growth. Dallas-Fort Worth has about 57,000 units underway, accounting for 6.8% of inventory. However, inflation stress for many mid and lower-income households has been in effect as occupancy decreases in Class B properties and below. About 40% of the market’s inventory is labeled as a Class B property, negatively affecting the market due to shedding occupancy.
Houston, TX
Houston has experienced supply outpacing demand in the multifamily market but 2024 is a promising year for the market. About 13,000 units were absorbed Q1-Q3 2023, five times the number of units absorbed during the same period last year. This growth is anticipated to continue, with the prediction of 20,000+ new units set to open in 2024. This is a three-year high for the market. The forefront of the construction velocity is within the north and west suburban areas.
Due to the high number of delivered units, rent growth has slowed, and vacancy rates have ticked higher to 10.3%. Class B-priced units have emerged for the first time since 2021, and inflation in the area has decreased significantly over the past year after reaching double digits last summer. Houston’s multifamily market sales have slowed considerably in 2023. As of Q4 2023, the makeup of the buyer pool has shifted, with institutional capital and private equity accounting for more than 60% of buyer volume over the past four quarters. Although economic uncertainty in Houston remains uniform with the rest of the country, the Houston market remains positive on its long-term potential for job growth, population growth, and ensuing multifamily demand. Click here to view the latest Houston multifamily market report.
California | Review & Outlook
Los Angeles, CA
In 2023, 4,800 units were absorbed, below the 8,000 units absorbed annually on average over the past decade. Vacancy rates increased from 4.4% one year go to 4.8% in 2023 as 12,248 units were delivered. In addition, Los Angeles rental rates have fallen short of national averages for years. Average asking rents in the market increased by 11.6% over past five years, compared to the national average of 20.3%. This underperformance is attributed to the steep rise in vacancy faced in 2020 during the early stages of the pandemic.
Development levels have stayed consistent. Around 9,000 to 12,000 units have been added annually since 2018. Los Angeles saw 12,000 net new market-rate units complete since Q3 2022, representing inventory growth of around 1.2%. Most of the construction is located in Downtown Los Angeles and Koreatown, with just under 2,800 units and 2,000 units, respectively. In Downtown Los Angeles and Koreatown, about 85% is ground-up Class A development and the remaining is conversion of older office buildings into multifamily. The increase in debt costs has led to declining sales volumes in 2023. Click here to view the latest Los Angeles multifamily market report.
Sacramento, CA
Sacramento’s residents have become price-sensitive due to increasing interest rates, years of record rent growth, and high inflation. The demand for one- and two-bedroom units has returned since the large move-outs seen in 2022. However, the wave of inventory delivered in Sacramento increased the vacancy rate to 6.6%. Most of the demand comes from residents moving to the city from the Bay Area, where rents are significantly higher. Sacramento offers cheap monthly rent compared to large California cities. The average rent is $1,780/month, a discount of more than 40% compared to San Francisco, just 90 miles away.
Sacramento’s monthly average rent is still higher than the national average of $1,660. In total, 2,400 units have been delivered in the past twelve months, while 1,280 units have been absorbed. Construction continues to outweigh demand in Sacramento as 3,900 units are currently in the pipeline, accounting for 2.8% of inventory. Sales in Sacramento, like most of the country, are very weak. In 2023, sales reached only $313 million from 82 transactions, compared to the past five-year average of $1.3 billion. This can be linked to slowing rent growth, rising vacancy, and a disconnect between seller expectations and buyer pricing. With the prediction of increased cap rates, a quick turnaround for sales in Sacramento is unlikely.
Walnut Creek, CA
Walnut Creek is a popular option for residents looking to move out of expensive cities such as San Francisco, Oakland, and San Jose. In mid-2022, Walnut Creek saw a decade low vacancy rate of 3.8%. Recently, vacancy rates have crept up to 6.8% as large deliveries have overwhelmed the downshift in space signings. Despite growing population totals over the past decade, Walnut Creek is still experiencing demand weaknesses. The slight supply imbalance attributed to the 0.7% increase in vacancy rates in the past twelve months.
Walnut Creek offers a high quality of life, community amenities, and solid school ratings, helping strong multifamily demand. The overwhelming majority of ~2,200 units added over the past decade were in Lafayette and Pleasant Hill. These are highlighted due to development efforts to capitalize on transit options. In 2023, six properties traded, totaling $44.3 million in record volume. Many of Walnut Creek’s transactions have been on the smaller side, pricing from $5 million to $12 million.
Orange County, CA
Compared to the nation’s largest 50 multifamily markets, Orange County continues to stand out positively. The market ranks third lowest for apartment vacancy compared to the national average at just 3.9% versus 7.1%. Affordability is a strong testament to the low vacancy as incomes catch up to higher rental rates. In addition, job growth remains positive, and population outflows have subsided with the end of the pandemic. Net absorption nearly matched supply growth in Q2 and Q3 2023, leading to a more stable market vacancy rate.
Rents increased by 1.3% by year-end 2023 due to high-quality apartment rents growing and low quality apartment rents moderating. Nevertheless, Class C apartment buildings still have the strongest rent growth of an average of 2.6%. Orange County ranks among the lowest markets with construction projects, where most development is concentrated in Irvine. The market broke ground with less than 1,000 units in 2023, compared to the five-year average of 2,700 units. This is predominately due to construction financing becoming increasingly challenging to source. O.C. is on pace for a 35% shortfall. Sales volume in 2023 totaled $1 billion, compared to the five-year average of $1.8 billion.
However, this downturn is more moderate than the national fall of 63% in sales. Job growth in Orange County has been limited due to the lack of available workers. During the pandemic, many residents fled to cities outside of California, which disturbed job growth potential. However, in Q3 2023, Orange County saw a jump in total nonfarm employment, measuring 1.4% above pre-pandemic levels. O.C. remains tight in unemployment rates compared to surrounding cities. Despite a 0.4% jump over the two years ending in June 2023, the market is up to a 3.9% unemployment rate. Click here to view the latest Orange County multifamily market report.
San Diego, CA
Throughout 2023, San Diego’s multifamily sector saw mixed results. In Chula Vista, Balboa Park, and the I-15 Corridor, demand was on par with 2015 and 2019 numbers. In addition, these neighborhoods saw new supply, outpacing historical norms. Demand in these submarkets is primarily driven by Class A buildings. Construction continues to be heavy in these submarkets, leading to increased demand among high-net households. In total, 8,300 units are under construction, and the region has added ~19,000 new units in the past five years.
In Q3 2023, rent growth fell, which has not happened in the past 10 years. This lack of performance is attributed to expensive coastal areas, such as UTC and the North Shore Cities. These areas have seen rents fall year-over-year. The number of transactions during Q3 2023 was more than 50% below the quarterly average between 2015 and 2019. Investment volume has fallen to historically low levels, and sales volume was one-third of the Q3 2021 peak. The average transactional price recorded $390,000 per unit in 2023, compared with $400,000 per unit in 2022. Cap rates have also increased from an average of 4.2% to between 4.3% and 5% in 2023.
