A new report from Multilytics, Origin Investments’ proprietary suite of machine learning models, forecasts that year-over-year national Class A apartment rent growth will return to positive territory by January 2025, ranging from 2% to 3% in keeping with historical averages.
The “Multilytics Rent Growth Forecast Report” also predicts that year-over-year rent growth will return slowly to normal by the start of 2025 in many of Origin’s target investment markets, with all of its markets returning to positive territory—from 1.78% in Jacksonville, Florida, to 5.9% in Phoenix.
However, Origin cautions that unquantifiable risks will remain in the market for the coming year, which could have broad implications for multifamily properties. Rent growth in 2024 faces potential threats because of the uncertain economic environment. One potential scenario—an increase in unemployment and lower wage growth trends with the continued level of new supply being delivered—would have a negative impact on rent growth. As vacancy rates increase with lower demand, price adjustments and concessions follow, noted Origin.
“The return to normalization has been expected because the rent growth levels of 2021 and 2022 were unsustainable. We are now paying for the distortions of the past,” said co-CEO David Scherer. “It leads us to tempered optimism in the near term given the number of other unquantifiable risks that loom over the marketplace.”
According to the report, which includes forecasts from January 2024 to January 2025, year-over-year growth in the 2% to 3% range means Class A multifamily rents will regain the lost ground from this year.
“The fact that many markets are turning to positive year-over-year growth is somewhat misleading,” added Ryan Brown, Origin Investments’ data scientist. “While a given market may achieve 3% to 4% growth, you also have to consider the negative growth in 2023. As a result, the return of positive growth may only get you back to the peaks achieved in 2021 and 2022. It will take longer to move beyond that peak.”
The report predicts that regional year-over-year rent growth for Class A will be the highest in the West at 2.9% and lowest in the Southeast at 0.1%, with the Midwest, 2.6%; Southwest, 2.2%; and Northeast, 1.28%, falling in between. For gateway markets, year-over-year rent growth is forecast to increase by 2.5%.
In the 15 markets where Origin’s real estate funds own and are developing multifamily communities, it projects above-average rent growth for Phoenix, 5.9%; Denver, 5.09%; and Colorado Springs, Colorado, 5.1%. While the Southeast is expected to only achieve nominal increases, several of Origin’s markets are predicted to see more significant growth, including Nashville, Tennessee, 5.88%; Tampa, Florida, 4.5%; Orlando, Florida, 3.71%; Charlotte, North Carolina, 2.69%; and Atlanta, 2.6%.
