These Multifamily Markets Are Faring the Worst in Absorption

As the late writer Mark Twain said, “If you don’t like New England weather, wait a few minutes.” The same might be said about annual apartment absorption in different markets of the country. In fact, shifts in absorption have been noticeable across the country, from Los Angeles on the West Coast to New York’s Bronx borough in the East, to Chicago and Detroit in the Heartland and Dallas and San Antonio in the Southwest. 

Overall, demand slowed in the last part of 2022, then picked up in the first few months of 2023, according to RealPage Market Analytics’ June 2023 report. Nevertheless, a few of the largest 50 markets remain negative for absorption with 10 having net move-outs from 5,500 units or more. Some of these 10 included the very largest markets of Los Angeles, Dallas, Houston and New York.

Hemorrhaging or move-outs have now mainly slowed, except for a few areas, including three that posted negative numbers of more than 10,000 units in the year that ended in 2023’s first quarter. These represented a geographically diverse mix of Los Angeles at the top with 14,914 units, followed by Houston with 13,537 and Dallas at 10,383. The other seven showing negative absorption of a smaller number between 5,500 and 8,300 units, were also located coast to coast and in between with New York at negative 8,328, Detroit at 8,114, Chicago at 7,576, Atlanta at 6,829, Las Vegas at 5,851, San Antonio at 5,769 and Riverside, Calif., at 5,527.

A handful of these markets experienced high delivery volumes during the same year period, RealPage reported, including Dallas, Atlanta, Houston, New York and Los Angeles. Yet, except for New York and Chicago, occupancy was below the five-year average as of 2023’s first quarter.

San Antonio had the deepest occupancy dive year-over-year, falling 430 basis points to 92.5%. Occupancy also fell between 300 bps and 400 bps in six other markets: Las Vegas at 390, Dallas at 360, Atlanta and Houston both at 350, Detroit at 340 and Riverside at 310. In Los Angeles, occupancy remains tight but still fell 210 bps for the year to 95.8%, as of the first quarter of 2023. Occupancy also dropped in Chicago but slightly less, down 180 bps, to hit an occupancy rate of 95.3%. And even in expensive New York City, occupancy was considered tight at 97.3%, having fallen only 100 bps below the prior year’s rate.

Smaller submarkets were not shielded from the same trend their larger counterparts experienced. For the same year that ended in the first quarter of 2023, the Bronx, one of New York’s boroughs, was down by 23,350 units. Much smaller but still falling was the Northern Suburban market of New York at negative 1,720 units, followed by New York City’s Midtown East market with negative 1,480 units. That area is around 34th Street and 59th Street and from the East River through First, Second, Third, Lexington, Park, Madison and Fifth avenues with a western boundary at Sixth avenue. 

Following New York’s submarkets with poor absorption was suburban Chicago with the most negative area being South Cook County with negative 1,968 units, followed by Evanston/Rogers Park/Uptown at negative 1,368 units. Evanston is home to Northwestern’s main campus.

Two suburban Dallas submarkets reflect move-outs with Northeast Dallas first at 1,603 units and then Far North Dallas at 1,318 units. Rounding out the 10 worst submarket performers were Detroit City at negative 1,861 units, Long Beach, Calif., at negative 1,535 units and South Los Angeles at negative 1,430 units.

But wait again a few quarters and the weather and numbers again may change.