Three Apartment Markets Have Above-Average Rent Growth, Inventory

Columbus, Minneapolis, and Denver were the only major apartment markets that grew both inventory at a faster rate than the US average and posted rent growth above the near-stagnant norm nationally, according to a new report from RealPage Analytics.

The three grew total inventories between 3% and 3.2% in 2023 – which is within 40 bps of the national norm.

RealPage analyst Julia Bunch writes that there is a direct inverse relationship between apartment rent growth and apartment inventory growth.

“The more apartment units a market builds, the more downward pressure operators face to keep prices low,” she said. “The fewer apartment units a market builds, the more runway operators have to realize pricing power.”

In 2023, developers delivered an “astounding” 440,000 apartment units nationwide and occupancy dipped 90 basis points (bps) under the weight of all that new supply. Rents ticked up a minor 0.2%.

Markets that delivered the highest ratio of new inventory also tended to cut rents at the deepest clip, she said.

Inventory was increased at a rate above the national average (2.8%) by 17 of the top 50 markets in 2023.

Among those high supply markets, Salt Lake City and Nashville were the “clear supply heavyweights,” both growing total inventory 7% or more in 2023 alone.

Effective asking rents fell by 2.2% on average in 2023 in those 17 markets compared to marginal growth nationally. Some high-supply markets posted especially deep rent cuts – such as Austin, Jacksonville, and Atlanta.

Twenty markets, mostly in the Midwest, grew inventory below the national norm in 2023 and subsequently realized annual effective rent growth above the national norm.

Cincinnati, Chicago, Milwaukee, and Cleveland all posting 2023 rent growth of 3% or higher. Characteristically slow-and-steady markets also made the list, including Boston, Philadelphia, Baltimore, and Pittsburgh.

Few Sun Belt markets made this list, as that region is generally adding more inventory than anywhere else in the nation. Miami and Memphis are perhaps the only two exceptions within the Sun Belt.

A smaller grouping of markets, overwhelmingly located in the West, posted both low inventory growth – or at least lower inventory growth than the national norm of 2.8% – and rent cuts.

Fort Lauderdale was an exception, growing total inventory 2.2% in 2023, registering a marginal 10 bps below the US average.

A couple of these West region markets in this group have struggled with demand throughout the pandemic recovery period, such as San Francisco, Portland, and Sacramento. There, Bunch said operators have struggled to maintain pricing power amid demographic headwinds.