Apartment Occupancy Drops to a 10-year Low

At the end of 2023, U.S. apartment occupancy hit a 10-year low, according to a report from RealPage Market Analytics. This, in part, is due to an increase in apartment supply not seen since the 1980s.

Apartment occupancy and rents saw a significant increase at the end of 2021 into the first few months of 2022, following the height of the pandemic. As a result, eager developers applied for permits for additional construction projects, resulting in sizable new supply volumes in the apartment market.

But as that new construction was being delivered, the apartment rental market changed. In December 2023, the occupancy rate in the nation was 94.1%, which is the lowest recorded since January 2014. December 2023 occupancy registered more than 100 basis points (bps) behind the nation’s decade average of 95.4%.

Overall, the occupancy rates were the same across the nation, with a handful of exceptions. A very rare group, including college towns Champaign-Urbana, College Station-Bryan, New Haven-Milford, and Midland/Odessa, saw occupancy were ahead of decade norms.

On the other hand, most of the largest 50 apartment markets reported occupancy behind their 10-year averages, with supply culpable.

Markets with apartment occupancy well below 10-year averages include Jacksonville, Phoenix, Fort Worth, Salt Lake City, Atlanta, Charlotte, San Antonio, and Austin. December 2023 occupancy in these markets ranged from 91% to nearly 94%, registering below 10-year averages by 230 bps or more.

Several markets in the Sun Belt made this list, which experts report is no surprise. While apartment demand across the Sun Belt states has been high, new supply volumes have surpassed demand.  Austin and Charlotte are markets that experienced high inventory growth, with supply surging by 25.5% and 24.6%, respectively, in the past few years alone.

However, a few large markets saw December 2023 occupancy that was right in line with decade norms. In Chicago, New York, Newark, Anaheim, West Palm Beach, Virginia Beach, and San Francisco, the market occupancy was 30 bps or less behind the typical showing Apartment inventory growth in most of those markets was subtle over the last few years, with growth less than 6% on average.

Even in the markets with apartment occupancy well below 10-year averages, the December 2023 occupancy was not terrible. In addition, experts recognize the important role a significant increase in supply volumes have played in these markets.