An imbalance of multifamily demand and supply has created downward pressure on rents, with vacancy rates spiking – but some metro areas are making an exception. Demographic shifts and business movements from northern and eastern parts of the U.S. to the south and west caused a need for more housing. Developers chased the trends, and the results were excess supply in some important markets.
But things have a way of working out. Multifamily absorption reached a 24-year record in the second quarter of 2024. "The impressive demand reading in the year-ending 2nd quarter 2024 may be difficult to overstate," said an early July report from RealPage Market Analytics, citing the 390,000 net units leased over the past 12 months. It was the eighth-highest annual number since the year 2000.
Cushman & Wakefield agreed. Given the level of absorption, which nearly surpassed total demand from last year, multifamily vacancies dropped by 10 basis points.
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However, a new RealPage report was a reminder that average numbers can often deceive. All of the 50 largest apartment markets saw some positive demand, and yet "a handful of markets stood out."
The top 10 were Dallas-Plano-Irving, TX; Austin-Round Rock, TX; Phoenix-Mesa-Scottsdale, AZ; Houston-The Woodlands-Sugar Land, TX; New York-White Plains, NY; Atlanta-Sandy Springs-Roswell, GA; Denver-Aurora-Lakewood, CO; Nashville-Davidson-Murfreesboro-Franklin, TN; Washington-Arlington-Alexandria, DC–MD-VA; and Seattle-Bellevue-Everett, WA.
RealPage noted that net absorption from April to June was 161,700 units. The 10 leading markets for absorption had a total of 61,110 units or 37.8% of the total. The top 10 markets also saw the most apartment unit deliveries during the last 18-month building cycle.
On reflection, this should be surprising. Developers were trying to provide new units in areas with some of the fastest-growing populations in the country. There would be a lag between construction and inhabitance. But these were the areas that by definition had the largest groups of people who needed additional housing, so the greatest chance of leasing the additional units.
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