RealPage Economists’ Picks for Favorite Apartment Markets in 2024

2024 is shaping to be a pivotal year for the U.S. apartment market, with a record supply of approximately 670,000 new units, dwarfing 2023’s already impressive 440,000 units. Amidst this surge, which markets are top picks?

Leading the pack: Economists from RealPage have spotlighted stable Midwest markets like Chicago, Cincinnati, Cleveland, and Columbus, along with Northeast metros Boston and New York, as top performers for 2024. These markets boast high occupancy rates above 94% and have experienced rent growth surpassing national averages in 2023. Their construction activities have been moderate, indicating a balanced supply for the coming year.

In the hunt: Houston’s balanced supply-to-demand ratio could surpass other Texas markets in the near future. And despite a considerable supply planned for DC, the capitol is expected to outperform in 2024 due to concentrated growth in key submarkets. In fact, a third of DC’s submarkets will see no new supply in 2024.

Strong demand: Markets like Austin, Charlotte, Dallas/Fort Worth, Nashville, Orlando, Phoenix, and Salt Lake City are expected to see solid demand but might experience limited rent growth due to intense supply. These areas are set to witness inventory growth well above the national average, with some, like Austin and Phoenix, expecting increases of over 8%.

Wild cards: Atlanta, Miami, Newark, Seattle, and Tampa are the wild cards for 2024. Notably, Newark is absorbing new supply due to rising demand for more affordable apartments, especially from those relocating from Manhattan, making it a market to watch closely.

Challenges ahead: Meanwhile, major West Coast metros like LA, Las Vegas, Portland, San Francisco, and Oakland could face potential demand challenges this year. These metros all experienced rent cuts in 2023, and their occupancy rates ranged from 94–95%. While the new supply has been reasonable, it’s expected to limit rent growth potential, says RealPage.

➥ THE TAKEAWAY

A tale of many regions: The U.S. apartment market is bracing for a surge in apartment supply in 2024, which will significantly impact performance. While stable Midwest and Northeast markets are projected to lead in terms of occupancy and rent growth, challenges may arise in the West and other supply-heavy markets.

RXR and Ares Launch $1bn Fund to Invest in Distressed NYC Offices

RXR (RXRA), one of New York’s largest office landlords, is joining forces with alternative investment manager Ares Management to launch a $1B fund aimed at investing in distressed office buildings in the city. 

Why the conviction? The partners believe prolonged uncertainty around interest rates and remote work has thawed the city’s CRE market, presenting discounted opportunities. The fund will target office buildings that require fresh capital to remain competitive or restructured debts due to higher rates and slower rent growth.

Diamonds in the rough: RXR and Ares plan to focus on the upper quartile of class-A NYC offices, which offer potential value due to being shunned by lenders and investors. These properties, ranking below the newest and most modern towers but above older offices becoming obsolete, present a unique opportunity for opportunistic investors.

Rising expectations: $117B in commercial mortgages tied to U.S. offices will mature this year, contributing to tons of distressed sales. The tightening in CRE debt availability and the inclination of banks to shed exposure has left office owners with few options for refinancing loans or securing new capital for property improvements.

Capitalizing on conditions: Ares continues to fill gaps left by retreating lenders. Last year, it acquired PacWest Bancorp’s $3.5bn loan portfolio during its liquidity crisis. Now, they are joining forces alongside RXR, seeding the new fund with $500mn and aiming to raise another $500mn. “We bring capital and operational expertise and an understanding of what’s happening in the leasing market to know where tenants are going,” said Rechler.

➥ THE TAKEAWAY

Why it matters: This move by RXR and Ares could be a game-changer for New York’s CRE market, signaling a shift in investment strategies post-pandemic. As remote work reduces demand for office space and rising rates add to challenges faced by property owners, distressed dealmaking is expected to go up. The launch of RXR and Ares Management’s $1B fund highlights the potential for value creation in the upper quartile of the middle class-A office market, mostly overlooked by lenders and investors.

In 2023, top U.S. apartment markets saw Houston leading (15,606 units absorbed annually), followed by Austin (11,388) and Charlotte (10,317). DFW came in 4th (10,181). Interestingly, no major coastal gateway cities made the top 10, except for DC. Florida cities were absent from the top 10 entirely.