Future Cities

Northeast, Midwest Eclipse Sun Belt for Multifamily Rent Growth

June 6, 2023 2 Minute Read

CBRE has identified four classifications of markets with similar multifamily rent growth patterns since the start of the pandemic: Sun Belt/Mountain, Urban Hubs, Midwest/Northeast and Florida. The Midwest/Northeast regional group is expected to see cumulative multifamily rent growth of 5.2% over the next two years, replacing Sun Belt/Mountain as the leader.

Figure 1: Year-over-year Rent Growth by Market Group

Image of line graph

Note: The Urban Hubs group consists of Boston, New York, Washington D.C., Chicago, Los Angeles, the San Francisco Bay Area and Seattle.
Source: CBRE Research, CBRE Econometric Advisors, Q2 2023.

While the Sun Belt has seen significant rent growth during the pandemic, much of it was driven by six Florida markets, which is why they’re classified separately. Salt Lake City and Denver in the Mountain region both exhibited the same overall rental trends as Sun Belt markets, which is why those two regions were combined.

Urban hubs, the Midwest/Northeast and Florida are all currently outperforming the Sun Belt/Mountain with year-over-year rent growth of more than 5% vs. 3.3%. These three regions also are forecast to outperform the Sun Belt/Mountain (4.3% expected cumulative rent growth) over the next two years before moderating to their long-run historical averages. As always, some markets will underperform and others will overperform the group average.

Figure 2: Top 20 Markets for Forecast Rent Growth, Q1 2023 - Q1 2025

Image of bar graph

Note: Excludes markets below a 100,000 unit inventory threshold.
Source: CBRE Research, CBRE Econometric Advisors, Q2 2023.

The Sun Belt markets of Nashville and San Diego lead the top 20 U.S. markets for forecast rent growth over the next two years at 6.8% and 6.7%, respectively. Eleven of the top 20 are in the Midwest and Northeast, as are the urban hubs of Chicago and Boston. Orlando and Miami were the only Florida markets among the top 20, while Charlotte and Riverside were the two additional Sun Belt markets.

Over the long-term, we expect most multifamily markets to revert to their historical rent growth averages. There is already evidence of overall market stabilization despite a recent supply and demand imbalance that raised the overall vacancy rate to 4.9% in Q1 from 2.4% a year earlier. We expect the vacancy rate to peak at 5.3% next year before beginning to decline in 2025 as demand improves, which underpins CBRE’s forecast for stable rent growth.

For more information on CBRE's data science and forecasting capabilities, please visit CBRE Econometric Advisors at cbre-ea.com.

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