Heavy Supply Weighs Down Record Multifamily Deliveries

Multifamily supply overabundance continues to keep owners from seeing the vacancy rates and rents they otherwise might have, says RealPage.

RealPage had previously estimated that multifamily deliveries would top last year’s record-breaking levels by half.

The effects were already seen in the first quarter. “Despite apartment demand recovering to stand above normal levels in 1st quarter 2024, even heavier supply continued to weigh down rent and occupancy figures,” RealPage wrote.

The country absorbed 103,826 units on net. That made the 12-month rate by the end of the first quarter 317,241. Compared to the mid-2010s, that is 20% higher. A number of factors are supporting the production. They include “persistent wage growth (which has now outpaced rent growth for 16 straight months), solid job growth, demographic tailwinds and arguably the lowest level of move-outs from apartment units and into single-family homes since the Great Financial Crisis.”

Even so, the demand has not kept up with supply. During the first quarter of 2024, developers completed 135,652 units. Looking back over the same 12 months ending in March 2024, there were 479,367 delivered units, a 10% increase over the 12-month pace that ended with the fourth quarter of 2023. With the 317,241-unit absorption, that would mean a surplus of 162,126 units. While high, it’s still significantly lower than the 530,000-unit surplus of a year ago.

“New apartment supply continues to be the primary influence on national performance,” RealPage wrote. “We’re sitting at the highest annual supply figure dating back to 1986 when approximately 550,000 new units were delivered. Though it’s important to note that today’s relative expansion rate of 2.5% remains comfortably below the 1986 expansion rate of 3%.”

That means the gap between supply and demand is closing. But it is still enough to restrict rent increases. RealPage also said that the imbalance is having less of an effect on occupancy rates. Nationally, occupancy was 94.1% at the end of March, keeping in line with the long-term average.

As one might expect, metro areas with less new supply could increase rents the most easily. Some of the rent growth leaders were Milwaukee (3.7% rent increase, 95.8% occupancy); Virginia Beach (3.5% rent change, 95.0% occupancy); Cleveland (3.3% rent change, 94.6% occupancy); Washington, D.C. (3.0% rent change, 94.8% occupancy); Cincinnati (3.0% rent change, 94.8% occupancy); and Chicago (3.0% rent change, 95.2% occupancy).

Those with the highest amount of new supply saw the biggest drops: Austin (-7.1% rent change, 92.4% occupancy); Jacksonville (-4.8% rent change, 91.9% occupancy); Orlando (-4.4% rent change, 92.1% occupancy); San Antonio (-4.3% rent change, 93.5% occupancy); Atlanta (-4.3% rent change, and Raleigh/Durham (-3.4% rent change, 92.% occupancy).

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