Scenes from the Slowdown in Multifamily Leasing Velocity

What’s happening now in multifamily leasing is similar to a play with many scenes that have a common theme running through: more new units have been added to inventory nationwide but the number seeking housing is not as robust as in the prior year. Specifically, the first quarter of 2023 delivered 95,000 new units with 19,200 of them absorbed, according to a report by Berkadia. 

Consider the following examples, or scenes if you will, from this quarter’s leasing season.

The change in leasing velocity has led to apartments staying vacant for an average of 30 days and occupancy averaging 94.8% in the first quarter, according to RealPage. This represents a two-day drop from the prior quarter but four days higher than the 26-day average before the pandemic.

Meanwhile, Class A apartments have the fewest average vacant days, below the 28-day national average.

By market, the Northeast had the country’s lowest average of vacant days. Its metros of Newark, Boston and Philadelphia ranged from vacancies of between 26 and 28 days.

When new inventory is analyzed by market, most areas have not had this volume of units occurring in such a short period. This happened the most last month in Dallas-Fort Worth, Phoenix and Atlanta. Each reflected slightly different variations on this scenario.

Dallas-Fort Worth’s numbers reflect its continued growth. Last year its metro ranked first for highest net in-migration nationwide. Last month almost 32,500 units were ready for lease-up, and more are coming with 7,400-plus projects underway as of early last month. Why? The report points to the market’s popularity and steady demand, as well as its urban amenities and relative affordability compared to other areas.

Phoenix had the highest net move-ins nationwide in last year’s first quarter. Fast forward to last month, and units in lease-up reached 21,900 among more than 100 properties. Again, consistent demand over recent years is the reason for this city’s growth. Phoenix has been among the country’s fastest-growing cities for years, according to U.S. Census Bureau numbers, and it’s expected to double in size by 2040.

Atlanta has been a mecca for developers and the proof is in the status of lease-ups and projects under construction. Both are said to have more than doubled in the last 12 months. As of May, nearly 19,000 units were in the lease-up category and 4,900 were under construction, with the latter in suburban submarkets such as the Far West and Far South suburbs.