Apartment demand during the first quarter was well ahead of average, boosting sector fundamentals back into a more normal range, according to a RealPage analysis. The report noted that the recent generational apartment supply wave began to ebb slightly during the first quarter, which indicates that the impact of high supply will start to pull back throughout the rest of 2025.
More than 138,000 market-rate units were absorbed between January and March, the highest first-quarter demand within RealPage’s data set going back more than 30 years. The first quarter's performance builds on three previous quarters of robust demand, totaling nearly 708,000 units absorbed nationwide over the past 12 months. This is consistent with absorption during the demand boom of early 2022, said RealPage.
Demand was ahead of supply for the quarter, with nearly 577,000 apartment units delivered, the highest supply volume in more than 50 years, except for the fourth quarter of 2024, when 589,000 units were delivered.
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Occupancy peaked through the first quarter to reach 95.2%, the highest reading since October 2022. This is in line with long-term norms, said RealPage.
On more balanced supply and demand trends, rent growth built modest momentum, with effective rents growing 0.75% in March, a 1.1% climb year-over-year. That is the highest reading since June 2023, said the report. Every market in RealPage’s 50 largest apartment markets list posted monthly rent increases in March.
Rent growth was strongest in the country's Midwest and Rust Belt regions, with the highest annual growth rates in Kansas City, Chicago, and Pittsburgh. San Jose and Cincinnati rounded out the top five apartment rent growth markets year-over-year in March.
On the other hand, rents continued to fall the most in the Sun Belt region, particularly in Austin and Phoenix, where supply is high. Denver, Atlanta, and Jacksonville rounded out the five markets with the deepest annual rent cuts.
“Even in the markets where rents are being cut most deeply, monthly rent growth in March indicates that momentum will likely build throughout the prime leasing season,” said the report.
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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.
