The Sunbelt has experienced a renewed surge in apartment demand this year after a supply and demand mismatch caused vacancy rates to climb over the past two years. With a significant decline in new construction starts this year, the region is poised for future growth, according to a multifamily report by American Landmark.
Southern markets continue to attract residents and businesses thanks to its favorable climate, economic opportunities and job growth, as well as a business-friendly environment, lower taxes and overall lower cost of living than in other regions of the country. These factors are fueling steady demand for rental properties as people seek accessible and flexible housing options as they follow job opportunities.
With 87% of the nation’s population growth last year, the South remains the most populous region in the country, according to the report. The region added more than 1.4 million people in 2023 to reach a total of more than 130 million residents.
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A key factor influencing multifamily occupancy rates is the lease-up of new construction entering the market, said American Landmark. When newly built properties in their lease-up phase are excluded, occupancy rates rise significantly. For example, in Dallas, the vacancy rate drops from 11% to 8% when lease-up projects are excluded, and in Tampa, it falls from 12% to 6.1%.
Rent growth has decelerated in the region, although American Landmark noted rents experienced an unsustainable surge during the pandemic and recent softening is a necessary correction.
Texas, Florida and North Carolina are key players in the multifamily market in the South. In Texas, occupied stock grew 3% in markets like Dallas/Ft. Worth and Houston. Vacancy rates remain in the single digits when new builds are excluded and are expected to peak near current levels early next year. This should drive positive rent growth, said the report.
With no state income tax and a warm climate, Florida is especially attractive to retirees and remote workers. Demand for retinal properties remains extremely high, led by Jacksonville and Orlando, where occupied stock is up by more than 6% since last year. Without new builds, vacancy rates are near 6% in Orlando and Tampa, and construction is expected to wane by mid-2025, which should drive positive rent growth.
A tight housing market and rising home prices in North Carolina are prompting more residents to rent. Charlotte and Raleigh have seen robust multifamily demand driven by job growth in the tech and finance sectors. Occupied units are up by 5.1% in Charlotte, as of the second quarter. New construction starts in Charlotte are down by only 16% from the 2024 level, which should keep vacancy rates relatively high through 2025 despite the strong demand keeping rents near current levels until at least 2026.
South Carolina, Tennessee and Georgia are also experiencing steady demand for rental properties, driven by strong job markets and population growth, particularly in Nashville and Charleston where rents continue to rise, said the report. As construction cycles wane, rent growth is expected to turn positive in Atlanta and Nashville in 2025.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
