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NEW YORK – Once empty apartment units are being filled and, for the first time in three years, the vacancy rate stopped increasing last quarter, according to CoStar.
Demand for apartments increased to its highest levels since 2021. With more than 1.2 million new apartment units built over the last two years and demand on the rise, landlords could have greater leverage in pricing in 2025, if the economy remains strong.
By the end of 2024, 672,000 new apartment units will have been completed, and just about 50% of that number is expected to be constructed next year, with even fewer in 2026, reported CoStar.
On an October earnings call, Eric Bolton, chief executive of publicly traded landlord Mid-America Apartment Communities, said, “The worst of the pressures on pricing from new supply are likely behind us.”
Apartment building sales also have increased nationally, as sellers come to terms on price. Renters in Tampa and other Sunbelt cities saw their rents rise 20% or more during the pandemic years, but rents on new leases have been flat nationwide for more than a year.
The disparity is due in part to a big split between supply-heavy Sunbelt cities, some of which have seen rent cuts, and the rest of the country, which hasn’t.
Yardi Matrix data show that renters who renewed their leases were still paying a 3.5% rent increase on average as of this past August, the most recent month data was available. As more employers recall workers to the office, urban rental demand is likely to increase, particularly in coastal cities.
Source: Wall Street Journal (11/05/24) Parker, Will
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