The multifamily sector is turning a corner as new supply has declined sharply. New construction activity is at its lowest level since 2016, with deliveries dropping roughly 30% year over year in the first quarter. At the same time, according to Cushman & Wakefield, demand has returned to more typical levels, keeping vacancy flat at 9.4%.
“The supply cycle is clearly shifting,” said Sam Tenenbaum, head of multifamily insights at Cushman & Wakefield. “Construction has slowed meaningfully, and demand is holding at levels consistent with historical norms. That combination is beginning to stabilize market conditions.”
Apartment demand totaled 65,200 units in the first quarter—down year over year but comparable with long-run seasonal averages. In Cushman & Wakefield’s first-quarter report, the real estate services firm noted affordability constraints in the for-sale home buyer market and growth in single-person households should continue to support demand.
Cushman & Wakefield highlighted some other key metrics for the period:
- Several markets continue to work through elevated pipelines. The Dallas-Fort Worth metroplex led the nation in deliveries in the first quarter, followed by New York; Houston; Charlotte, North Carolina; and Phoenix;
- Sun Belt markets continue to lead absorption. Phoenix; Dallas-Fort Worth; New York; Austin, Texas; and Charlotte saw the largest gains for the quarter;
- Class A vacancy declined year over year, while Class B and C vacancy increased by a similar magnitude; and
- National asking rents increased 0.9% year over year, with concessions remaining common in supply-heavy markets.
Cushman & Wakefield forecasts total absorption this year to be between 250,000 and 300,000 units if demand remains near historical averages. Although performance will vary across markets, that level of demand should help keep vacancy stable and support gradual improvement in rent growth.
“The direction of the market is becoming clearer as the supply pipeline contracts,” Tenenbaum added. “While conditions remain uneven, the balance between supply and demand is moving in a more favorable direction.”