According to CBRE's latest research, the U.S. multifamily market continued to see healthy demand in the third quarter of 2023, though rent growth slowed from previous highs.
The multifamily vacancy rate inched up by 10 basis points (bps) quarter-over-quarter to 5.1% in Q3 2023. This was a slower increase than the 30 bps in Q1 2023 and matches the 10 bps rise in Q2 2023. Net absorption climbed to 82,100 units in Q3 2023, indicating a return to more typical seasonal demand patterns which the pandemic had disrupted in 2021 and 2022.
"Renter demand remained healthy through the third quarter, largely offsetting record new construction," said Kelli Carhart, leader of Multifamily Capital Markets for CBRE. "We anticipate investment activity to pick up mid-2024, driven by an end to the Fed's rate hiking cycle and improved capital markets conditions, as well as loan maturities that will create transaction opportunities."
The average monthly net effective rent grew 0.7% year-over-year in Q3 2023, lower than the pre-pandemic five-year average of 2.7% and well below the peak of 15.2% in Q1 2022.
New construction deliveries reached another high of 114,600 units in Q3 2023, bringing the four-quarter total to a record 376,500. More moderate construction starts point to fewer new deliveries starting in 2025.
Other Q3 2023 Multifamily Sector Highlights: