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Following the slowdown in the second half of 2022, multifamily leasing continues to improve as inflation, including rent growth, moderates, according to the latest report from RealPage.

“So far in 2023, apartment demand is nipping at the heels of mounting new supply levels,” said Jay Parsons, RealPage senior vice president and chief economist. “That’s in line with our expectations going into the year that leasing would improve as inflation cools a bit. But the bigger challenge awaits in the second half of 2023 and into 2024, when completions ascend to the highest level since the 1980s.”

The national multifamily occupancy rate was 94.7% as of May, which matched April’s number and is coming in line with long-term norms, according to RealPage. Occupancy rates have been relatively steady so far in 2023 in contrast with what was seen in 2022 when the rate dropped 2.6 percentage points between February’s high of 97.6% and the end of the year.

Coming off of 2022 with record peaks of renter retention rates followed by steep declines, the report finds that these rates appear to be stabilizing. In May, 52.3% of renters with expiring leases signed renewals, nearly 2 percentage points above the pre-COVID average for May but well below last year’s peak of 56.9%.

Rent growth, although at a much more muted level, has returned. Effective asking rents for new leases rose 0.39% month over month—the smallest increase for the month of May in over a decade. May was the fifth straight month of rent increases following the drops toward the end of 2022; however, it also continued a pattern of below-normal increases as the amount of apartment supply has increased. Year-over-year rent growth was at 2.3% last month, the lowest since April 2021.

“May is typically the time of year when we see some of the largest seasonal rent bumps,” said Parsons. “But what we are seeing right now is that new supply is doing what it’s supposed to do—put downward pressure on rent growth. More supply and more availability mean that property managers are competing for renters again, which hasn’t really happened since 2020.”

Renewal rent growth, at 6.5% as of May, also slowed for the 10th consecutive month. According to RealPage, this means that renewals are growing more than new leases—for now—due to the still-wide gap between rents signed a year ago compared with asking rents today. However, the report noted that the gap is quickly shrinking.

The new supply hitting the market is one main reason for the slowing rent growth, with RealPage forecasting more than 500,000 units scheduled to complete across the nation in each of the next two years.

“There are dense pockets of apartment construction in markets of all sizes and in all regions of the country–not just the Sun Belt,” said Carl Whitaker, senior director of research and analysis at RealPage. “That means renters today have a lot more options than they did these last couple years, and, in turn, property managers are competing for leases.”

New lease rent growth is being seen in regions where construction is more limited like the Midwest and Northeast. As of May, markets in these two regions comprised 12 of the top 15 spots for year-over-year rent growth among the 50th largest metros. Northern New Jersey topped the list at 7.2%, followed by Cincinnati at 6.4% and Indianapolis at 6.1%. According to RealPage, the only other large markets above 5% were Miami; Kansas City, Missouri; and Virginia Beach, Virginia.

Eight major metros reported year-over-year declines in effective renters for new leases. Rents were down about 4% in Phoenix and Las Vegas, while smaller cuts were seen in Sacramento, California; Austin, Texas; San Francisco; Oakland, California; Jacksonville, Florida; and Atlanta. The report also noted that the once-hot Tampa, Florida, market is also cooling and could soon turn negative.