Although fundamentals remain strong, the multifamily market in Raleigh, North Carolina, is experiencing short-term challenges primarily due to a record-breaking supply influx, according to Will Mathews, vice chair and principal at Colliers.
According to Mathews, an estimated 11,600 units will be delivered this year, down from record highs in 2022 and 2023. Another 11,000 units are expected next year.
“This market is still absorbing this influx, which has pushed occupancy down from 93% in 2019 to 88% in 2024 [per CoStar data],” says Mathews. “Current market rents have decreased by 2.8% year over year. However, as the new supply is absorbed, occupancy rates are expected to recover and rent growth is projected to rebound to 4.4% annually in 2025 and 2026.”
Affordable living, temperate weather, and high-quality education and job opportunities are just a few of the reasons the market is attracting a diverse mix of new residents.
However, Mathews notes affordability is a growing concern for potential home buyers.
“Average home prices in Raleigh have surged by 79% since the end of 2016,” he says. “While Raleigh’s home prices remain more affordable than those in the Northeastern markets like New York, Boston, Philadelphia, and Washington, D.C., they are slightly higher than in Southern markets, including Charlotte, North Carolina; Nashville, Tennessee; and Atlanta. With Raleigh’s population projected to increase by 12.3% [per MacroTrends] over the next decade, homeownership will likely become more expensive. Renting remains the more flexible and affordable option.”
Looking ahead, Mathews is bullish on the Raleigh multifamily market, saying it’s more resilient to economic downturns than other cities due to the state government, Research Triangle Park, and the presence of major institutions such as Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University.
“The main concern is stagnating growth, but this risk is mitigated by strong migration trends and ongoing factors that are drawing new residents to Raleigh,” he says. “Developers and investors in the Raleigh market have significant opportunities ahead, particularly as the current wave of new supply begins to stabilize. With construction financing becoming more challenging, the pace of new development is expected to slow, meaning less new competition coming to market.”
