Ranking Multifamily Markets By Revenue

The latest Moody’s CRE multifamily update looked at how 82 primary multifamily markets performed based not on straight rent growth or property sales, but effective revenue.

It’s a look at what landlords actually receive. Effective revenue is occupancy rate times effective rent as an average per unit. Effective rent, or net effective rent, is the rent provided under the lease less any free rent periods, tenant improvement, or other cost reductions.

The strongest five year-over-year effective revenue-per-unit figures came from markets in Northeastern, Midwestern, and Southern Atlantic regions: New Haven, Connecticut (1.5% year-to-date increase); Long Island, New York (1.4% increase); Wichita, Kansas (1.3% increase); Nashville, Tennessee (1.2% increase); and Greenville, South Carolina (1.1% increase).

Then there were the five year-to-date biggest losses: Tulsa, Oklahoma (2.3% decrease); Austin, Texas (2.1% decrease); Colorado Springs, Colorado (1.9% decrease); Orange County, California (1.6% decrease); and Providence, Rhode Island (1.5% decrease).

Effective revenue on a regional basis, the Northeast on the whole was up 49 basis points. Other regions were down about 10 basis points (Southern Atlantic and Midwestern), just over 20 basis points (Southwestern), and 59 basis points (Western). The overall average in the U.S. was 19 basis points down.

Vacancy rates in the Northeast dropped by 10 basis points. Most other regions had no change — Southern Atlantic, Midwestern, and Western. The Southwestern region saw a 10-basis point increase in vacancy.

Among the markets that saw increases in effective revenue, Nashville and Greenville both saw 20-basis point drops in vacancy rates. New Haven’s vacancy rate edged down by 10 basis points. Long Island vacancies were flat while Wichita’s was up by 10 basis points.

One of the markets that saw a loss in effective revenue was Colorado Springs, a 10-basis point drop in vacancy. Providence and Tulsa remained at flat. Orange County’s vacancy was up 20 basis points and Austin was up 50 basis points.

Also interesting is how changes in effective rent and occupancy contributed to effective revenue. In Greenville, effective rent increases were 86.4% of the effective revenue increase, while changes in vacancy were 13.6%. For Nashville, effective rent increase contributed 89.9% and decreased vacancy, 10.1%. New Haven saw 96.4% of the revenue increase from effective rent and 3.6% from lower vacancy. Then things flip, with Long Island getting 104.2% from rent and losing 4.2% to higher vacancy.

“Nonetheless, lower effective revenue all comes down to perspective,” they wrote. “By this I mean, Austin ranked as the 55th most rent constrained Tier 1 market as of the first quarter of 2024 with a median rent to income ratio of 18.4%. Sure, not nearly as bad as New York or Miami, but with effective rents in Austin increasing at a CAGR of 3.3% since year-end 2019, any drop in rents is likely almost always welcomed by renters. Ultimately, however, it seems the profit potential that developers have vigorously targeted in Austin is starting to wane; well, at least for the time being. Real estate is, of course, a cyclical industry and considering the metro continues to benefit from favorable employment and population conditions, it’s just a matter of time before the pendulum swings back in the other direction.”