How the Market Cycle is Likely to Play Out for Multifamily

New forecasts from CBRE Econometric Advisors show that U.S. multifamily vacancy should continue to rise through Q4 2020 and rents should continue to move down through Q1 2021.

Steady recovery is projected after that. The market should reach recovery (turning to pre-COVID levels) by Q1 2022.

The broad economy, particularly employment, recovery is the main driver to the forecasts. The forecasts are based on one quarter of negative net absorption (Q3's -173,000 units), but stronger demand following that. Faster or slower economic recovery would impact demand and consequently vacancy and rents.

Policy and fiscal stimulus are major variables. Major changes in policy could impact the market. For example, extended eviction moratoriums should help keep vacancy rates lower, but at a cost to owners (lower revenues) which do not show up in the basic market statistics.

High levels of new supply is another key variable. The forecasts assume that multifamily demand will rebound quickly once the economy is further along in recovery. If demand falters, the high levels of new supply will place more downward pressure on the market than currently forecasted. Of course, a stronger economic recovery would go a long ways to helping the market absorb the new units.