- The multifamily vacancy rate held steady at 5.5% in 2Q24, signaling potential market stabilization.
- Rents, which inched up 0.3% in Q2, are expected to pick up speed in Q4, as demand strengthens.
- The multifamily sector saw investment volume surge by 82% QoQ, driven by investor optimism and stabilizing fundamentals.
The U.S. multifamily market appears to have turned a corner, with CBRE declaring that improving fundamentals signal stabilization, as reported in Globest.
By The Numbers
The overall vacancy rate, which had been rising for two years, held steady at 5.5% in Q2, suggesting the market may have reached equilibrium.
CBRE forecasts a downward trend in vacancy rates, with a return to the long-run average of 5% expected in upcoming quarters. CBRE’s Executive Managing Director of Multifamily Capital Markets, Kelli Carhart added that transaction volume is expected to remain robust through the rest of the year.
Accelerating Rent Growth
Rent growth, while modest at 0.3% YoY, is also expected to gain momentum by Q4. This acceleration will coincide with rising occupancy levels, reinforcing the outlook for a recovering market.
Despite a slower rent growth rate compared to Q1, CBRE sees this potential stabilization as a positive sign of market resilience in the face of supply pressures.
Carhart said the market is “absorbing supply and responding well.” Her remarks align with recent findings from CoStar Group, which also highlighted rising demand across the multifamily sector.
Sun Belt Slowdown
Despite the positive national outlook, challenges remain, particularly in the Sun Belt, where an influx of new supply continues to put downward pressure on rents.
Markets like Austin, Jacksonville, and Atlanta saw contracting annual rent growth during the quarter, highlighting the difficulties property owners face in boosting rents in oversupplied regions.
In contrast, markets in the Northeast and Midwest, which have experienced stable rent growth, are faring better due to more controlled supply. “Some markets are already on an upswing, and they are not in the Sun Belt,” Carhart noted.
Investment Outlook
Investor sentiment is improving, with CBRE reporting a sharp 82% spike in multifamily investment volume on a QoQ basis, reaching $38.3B. The multifamily sector accounted for nearly half of all CRE investment during Q2, underscoring its importance as a leading asset class.
Although transaction volumes remain below pre-pandemic levels, there is growing confidence in an eventual market recovery. Investors anticipate that property values will rebound within the next 36 to 48 months, leading to more opportunities in 2025 and further recovery in 2026 and 2027.
With net absorption outpacing completions in Q2, CBRE anticipates a moderation in new supply, which should further support the market’s recovery trajectory.
