Apartment Markets Across America Continue to Stabilize in 2023

Apartment Markets Across America Continue to Stabilize in 2023

Commercial News » New York City Edition | By Michael Gerrity | August 1, 2023 7:42 AM ET

According to CBRE's latest research, the U.S. multifamily market showed signs of stabilization in the second quarter of 2023 with a rebound in absorption and modest uptick in vacancy.

The multifamily vacancy rate rose by 10 basis points (bps) quarter-over-quarter in Q2 2023 to 5.0%. This was a slower increase than the 30 bps rise in Q1 2023, and the 70 bps in Q4 2022. Notably, net absorption escalated to 70,200 units in Q2 2023--the highest since Q1 2022--indicating a recovery in renter demand.

"Despite a heavy supply pipeline, we are seeing renter demand remain solid as vacancy and rent growth stabilize across most markets," said Kelli Carhart, Executive Managing Director and leader of Multifamily Capital Markets for CBRE. "With inflation easing, we anticipate increased investment activity in the second half of 2023, notwithstanding capital markets volatility."

The average monthly net effective rent increased by 2.6% year-over-year in Q2 2023, consistent with the pre-pandemic five-year average of 2.7%, although significantly less than the record 15.2% in Q1 2022.

New construction deliveries of 91,400 units in Q2 2023 brought the four-quarter total to a record high 351,500. Declining construction starts in recent quarters will result in fewer new deliveries in 2024 and beyond.

Other Q2 2023 Multifamily Sector Highlights by CBRE: 

  • The Northeast/Mid-Atlantic region saw the highest year-over-year rent growth in Q2 2023, led by Newark (5.6%), Providence (5.3%) and Hartford (5.2%). The Midwest had the second-highest rent growth at 4.3%, followed by the Southeast (2.0%), South-Central (1.7%), Pacific (1.4%) and the Mountain West (-0.9%).
  • Most markets (58 out of the 69) tracked by CBRE recorded positive net absorption in Q2 2023, led by Chicago (4,600 units), Orlando (4,100) and Denver (4,000).
  • The top five markets for new deliveries over the past four quarters -- New York, Washington, D.C., Dallas, Orlando and Phoenix -- constituted 25% of the national total.
  • Almost all markets (67 out of 69) tracked by CBRE had vacancy rates equal to or above 3.0%, with 58 markets exceeding 4.0%. New York had the lowest vacancy rate at just 3.1%, falling below its historical average of 3.5%.

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