The Dynamic Between Apt. Supply and Rent Growth

Muoio: “Even though demand is remaining strong in markets such as New York City, San Francisco and Seattle, these markets face the most imposing supply pipelines, which will result in rising vacancies and decelerating rents.”

IRVINE, CA—What we’re seeing on a national basis is multifamily absorption remaining at robust levels, but a roughly equal amount of supply additions, Ten-X Research’s senior quantitative strategist Chris Muoio tells GlobeSt.com. According to the firm’s February Nowcast, the apartment sector once again recorded the strongest growth among all five CRE sectors, as pricing gained 1.4% in February. The sector has been a consistent standout of pricing strength, and is now up 16.6% over the past year.

The report also shows that multifamily fundamentals remain strong despite a significant pickup in development, as rents continue to grow and vacancies are holding steady at just over 4%. While most regions remain extremely healthy, the onslaught of new supply has begun to have an effect in the Northeast and West, where large metropolises such as New York City and San Francisco are beginning to see rents flatten after years of explosive growth.