Apartment occupancy has been trending up across all price points over the past year, with the highest growth coming from the priciest asset class, according to a RealPage report. Class A, B and C units all reported year-over-year occupancy gains in May, with stabilized Class A apartments standing out, hitting occupancy of 95.7%, the highest rate for the product class since June 2022. At that level, the higher tier occupancy is still slightly below Class B's, which stood at 95.8% in May, but above Class C occupancy, which was 95.6%. The category for Class A's climbed 170 basis points year-over-year, compared with a 150 basis point increase in Class B's and a 140 basis point increase in Class C's .
This trend marks a notable departure from pre-pandemic norms, when Class C units typically were filled up the most, averaging 96.4%, followed by Class B units at 95.3%. Class A units averaged the lowest occupancy of 94.7% between 2015 and 2019, according to RealPage. The shift began in late 2023, when Class B units overtook Class C as the most occupied property type for apartments. Until recently, Class A units have continued to trail as pricier units are more sensitive to competition from new product in lease-up as well as resident turnover due to home purchases. As of May, all three product classes registered occupancy above their pre-pandemic five-year norms, RealPage data shows.
The surge in higher-tier apartment occupancy comes against the backdrop of a record-setting wave of new supply, with more than 400,000 new multifamily units delivered nationwide in 2023—the highest annual total in more than three decades, according to Yardi Matrix and CBRE. Despite this influx, absorption has remained robust, particularly in Sun Belt markets and major metros, reflecting strong underlying demand. Industry analysts attribute much of this demand to persistent affordability challenges in the for-sale housing market. Elevated mortgage rates and home prices have kept many would-be buyers in the rental pool, a trend highlighted in late 2023 by the National Multifamily Housing Council and National Apartment Association.
While occupancy has risen, rent growth has moderated from the double-digit gains seen in 2021 and 2022. As of late 2023 and early 2024, annual rent growth for Class A properties slowed to around 2-3%, down from over 10% in previous years, making higher-end units more accessible to renters who previously opted for Class B or C units, according to Yardi Matrix. This moderation, combined with widespread leasing concessions—such as multiple months of free rent or waived fees, especially in high-supply markets like Austin and Atlanta—has helped fill Class A units quickly, even as it puts downward pressure on effective rents, RealPage and CoStar reported in the fourth quarter of 2023.
The reversal of pre-pandemic occupancy patterns signals a structural shift in renter preferences and market fundamentals, possibly influenced by changes in household formation and remote work. Migration to secondary and tertiary markets, accelerated by the pandemic, has also supported higher occupancy in new, upscale developments, as documented by the U.S. Census Bureau and industry moving reports throughout 2023.
Looking ahead, analysts caution that the record-breaking construction pipeline, especially in the luxury segment, could eventually outpace demand, leading to softer occupancy and rent growth in the coming years. For now, however, absorption remains healthy, and occupancy rates across all apartment classes are outperforming their historical averages, underscoring the resilience of the rental market even as new supply continues to come online.
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