Sunbelt Multifamily Rent Growth Takes Backseat to Northeast, Midwest But It’s Just Temporary

It is clear that the once high-growth Sunbelt multifamily markets are slowing as more supply enters the market pushing rent down. But a new analysis from CBRE suggests that the region’s fall is likely to be only temporary. 

Since the pandemic, CBRE has divided the country into four markets of similar multifamily rent growth patterns: Sun Belt/Mountain, Urban Hubs (Boston, New York, Washington, D.C., Chicago, Los Angeles, San Francisco Bay and Seattle), Northeast/Midwest and Florida.

The Northeast/Midwest regional group is expected to displace the Sun Belt/Mountain market as the top dog in cumulative multifamily rent growth, which is predicted to be 5.2% over the next two years, according to CBRE.

First, though, it is worth exploring how the Sun Belt lost its place. CBRE explains that the Sun Belt’s rent growth was due primarily to six Florida markets, which were separated out for this analysis. Salt Lake City and Denver in the Mountain region demonstrated similar overall rental trends as the Sun Belt, which is why they were lumped together in a single group.

The Northeast/Midwest, Urban Hubs and Florida all are performing better than the Sun Belt/Mountain market in year-over-year rent growth of more than 5% versus 3.3%. Those three markets are expected to outperform the Sun Belt/Mountain with 4.3% expected cumulative rent growth over the next two years. But then they should head back to their long-run historical averages after the two years. Then, the recent supply and demand imbalance that raised the vacancy rate to 4.9% in the first quarter from 2.4% a year before to peak at 5.3% will start to decline in 2025 as demand improves and stable rent growth will be the trend, according to CBRE.

In the meantime, of the top 20 markets predicted to show rent growth over the next two years, starting with last quarter 2023’s results and ending in the same first quarter in 2025, are a mix of locations from the Northeast’s Newark down to Orlando, out to Columbus and farther West to San Diego .And in the top two places with largest rent growth increases are the Sun Belt’s Nashville and  San Diego, followed by Cincinnati, Indianapolis, Newark, Providence, Charlotte, Orlando, Columbus, Boston, Chicago, Portland, Miami, Cleveland, Pittsburgh, St. Louis, Louisville, Riverside, Philadelphia and Kansas City, coming in last. Nashville leads at 6.8% to second place San Diego at 6.7%. Eleven of the top 20 are in the Northeast and Midwest. Orlando and Miami were the only Florida markets among this top 20 group. Charlotte and Riverside are additional strong Sun Belt markets for rent growth.