U.S. Multifamily Market Shows Resilience as Vacancy Rate Stabilizes

The U.S. multifamily market is demonstrating resilience and growth as the vacancy rate stabilizes after two years of quarterly increases, with expectations of declining rates in the coming months, according to CBRE’s latest research.

In Q2 2024, the multifamily vacancy rate has remained steady quarter-over-quarter at 5.5% and is anticipated to begin decreasing in the second half of the year, as the supply pipeline continues to diminish and renter demand remains robust. Strong demand in the quarter led to positive net absorption, which measures the change in the number of occupied units, of 126,600 units, marking the sixth-strongest second quarter in more than 20 years.

Average monthly rents in Q2 2024 edged up 0.3% compared to the same period in 2023, reaching $2,186. Rent growth in the U.S. multifamily sector is projected to accelerate as fewer new units come on the market owing to a slowdown in construction completions and positive net absorption continues.

The delivery of 119,400 new units in Q2 2024 contributed to a record four-quarter total of 460,200 units. However, supply pressure likely will ease in 2025 and beyond, as construction starts have eased.

Multifamily investment volume in Q2 increased by 82% quarter-over-quarter to $38.3 billion, with the sector accounting for the largest share of commercial real estate investment volume in Q2 2024 (43%).

“Market sentiment has improved significantly, as many investors believe that values have bottomed,” said Kelli Carhart, leader of Multifamily Capital Markets for CBRE. “Investor conviction remains strong, buoyed by stabilizing fundamentals and strong absorption and a decreasing delivery pipeline. We expect transaction volume will remain healthy throughout the balance of the year.”

Other Q2 2024 Multifamily Sector Highlights:

• The Midwest and Northeast regions experienced positive year-over-year rent growth across all markets in Q2 2024. The Midwest led with 2.5%, followed by the Northeast with 2.2%. The Southeast, South Central, and Mountain regions all saw negative average rent growth, while the Pacific region saw no change.
• Among the 69 markets tracked by CBRE, nearly all (66) recorded positive net absorption in Q2 2024, with New York (9,300 units), Austin (6,600) and Dallas (6,500) leading the way.
• Forty-five markets saw net absorption exceed new supply in Q2 2024, up from 24 markets in Q1 2024 and only two in Q4 2023.
• Vacancy rates declined in 43 markets quarter-over-quarter in Q2 2024, up significantly from 20 markets in Q1 2024.