The nation’s multifamily vacancy rate has stabilized after two years of quarterly increases, showing the market’s resilience, according to the latest research from CBRE.
In the second quarter, the vacancy rate held steady with the prior quarter at 5.5%. CBRE anticipates the rate to start declining in the second half of the year as the supply pipeline continues to decrease and renter demand remains strong. That robust renter demand led to positive net absorption, which measures the change in the number of occupied units, of 126,600 units, making it the sixth-strongest second quarter in over two decades.
In the second quarter, the average monthly rent inched up 0.3% year over year to $2,186. CBRE projects multifamily rent growth will begin accelerating in the fourth quarter as fewer new units come online due to a slowdown in starts.
While CBRE expects supply pressure to ease in 2025 and beyond, over 119,000 new units were delivered in the second quarter, marking a record four-quarter total of 460,200 units.
Investment volume saw a substantial quarter-over-quarter boost, increasing 82% in the second quarter to $38.3 billion. Blackstone’s $10 billion all-cash acquisition of AIR Communities is responsible for over a quarter of the total. Multifamily accounted for the largest share, 43%, of commercial real estate volume for the quarter. The rolling four-quarter investment volume increased by 5% to $119.1 billion, which marks the second-lowest four-quarter total since the third quarter of 2014.
“Market sentiment has improved significantly, as many investors believe that values have bottomed,” said Kelli Carhart, leader of CBRE’s multifamily capital markets. “Investor conviction remains strong, buoyed by stabilizing fundamentals, strong absorption, and a decreasing delivery pipeline. We expect transaction volume will remain healthy throughout the balance of the year.”
Other highlights from CBRE’s research include:
- 66 of the 69 markets tracked experienced positive net absorption in the second quarter, led by New York, 9,300 units; Austin, Texas, 6,600 units; and Dallas, 6,500 units. The three markets with negative absorption were Corpus Christi, Texas; Birmingham, Alabama; and Long Island, New York;
- 45 markets saw net absorption exceed new supply for the second quarter, led by Chicago, 800 units, and Portland, Oregon, and Cincinnati, 600 units. This is up from 24 markets in the first quarter and only two markets in the fourth quarter of 2023;
- New York, Dallas, Austin, Houston, and Atlanta were the top five markets for completions over the past four quarters, accounting for 29% of the national total;
- As of the second quarter, approximately 708,000 units were under construction, representing 3.9% of existing inventory for the markets tracked;
- Madison, Wisconsin, and Providence, Rhode Island, saw the nation’s lowest vacancy rates at 3% for the second quarter. Among larger markets, New York had the lowest rate of 3.3%;
- The average Class C vacancy rate remained steady at 5.5% for the second quarter, while Class A and B rates fell 10 basis points to 5.8% and 5.3%, respectively;
- The Midwest led year-over-year rent growth for the second quarter at 2.5%, while the Northeast followed at 2.2%; and
- The high-supply markets of Austin; Jacksonville, Florida; and Atlanta saw the most negative rent growth in the second quarter.
