U.S. Multifamily Rent Growth Expected to Accelerate Later this Year, Following Modest Year-Over-Year Increase in Q1

Growth of U.S. multifamily rents is expected to accelerate in the second half of 2024 amid slowing new construction completions and continued positive net absorption, according to CBRE’s latest research.

In Q1 2024, average monthly rents edged up 0.4% compared with Q1 2023, reaching $2,163.

During Q1 2024, 73,700 new units came online, contributing to a record four-quarter total of 429,500 units. However, a slowdown in construction starts portends an easing of supply pressures later this year and in 2025.

Despite a slight increase in the multifamily vacancy rate, reaching 5.5% in Q1 2024, strong demand led to net absorption, which measures the change in the number of occupied units, of 52,500 units, marking the third-strongest first quarter in more than 20 years and surpassing the pre-pandemic first-quarter average.

"Absorption has remained surprisingly resilient despite the record deliveries over the last few quarters,” said Kelli Carhart, leader of Multifamily Capital Markets for CBRE. “Investors continue to display a strong conviction towards multifamily. We expect multifamily capital allocation and deployment to increase as the year progresses.”

Other Q1 2024 Multifamily Sector Highlights:

• The Midwest and Northeast regions experienced positive year-over-year rent growth across all markets in Q1 2024. The Midwest led with 2.7%, followed by the Northeast with 2.4%. While the Southeast, South Central, Mountain and Pacific regions all saw negative average rent growth, the rate of decline has slowed compared with the previous quarter.
• Among the 69 markets tracked by CBRE, most (56) recorded positive net absorption in Q1 2024, with Orlando (3,500 units), Austin (2,700) and Denver (2,500) leading the way.
• Net absorption in the top 20 construction markets nearly matched the pace of new supply in Q1 2024 and improved from Q4 2023. This may portend a shift whereby demand eclipses new supply later this year, reducing overall vacancy.
• Vacancy rates declined in 27 markets in Q1 2024, versus just two markets in Q4 2023.