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Multi-family Real Estate Market Outlook for 2024: A Gentle Surge in Apartment Supply
The unprecedented wave of new apartment construction since decades will lead to a moderation of rent hikes and improved affordability for renters in the upcoming year. With an anticipated delivery of approximately 440,000 units across 69 tracked markets by CBRE, coupled with over 900,000 units currently under construction, the overall vacancy rate is forecasted to rise while rent growth is expected to decelerate.
In seven out of every ten markets, there's a high probability of inventory growth surpassing 7 in both 2024 and 2025. Construction completions have already peaked in several key cities including Chicago, Washington D.C., Las Vegas, and more will peak across the rest by 2024. Average rent growth is anticipated to slow down to a modest 1.2 for 2024 as supply pressures limit recent record-breaking rent hikes which currently stand at just 0.7 year-on-year in Q3 of 2023.
Despite facing near-term economic downturns and vacancy rates that will surpass pre-pandemic averages by 2024, there is enough demand expected to keep the average occupancy rate above 94. Developers have accurately predicted where demand would best support new supply based on employment growth figures. Markets leading in supply pipelines like Austin, Dallas, San Diego, Boston, and New York City are likely to outperform others due to their robust demand-side fundamentals.
Market-Specific Insights
San Diego: Supply growth has remned low with an average of only 3.1 over the past two years and forecasted at a mere 2.4 for 2024. The strong underpinning from high-quality, durable life sciences jobs will enable San Diego to outperform other markets.
Boston: Market fundamentals are buoyant due to growing sectors in technology and life sciences, along with limited construction projects. Balanced fundamentals suggest sustnable rent growth throughout the year.
New York City: Post-pandemic recovery continues with one of the lowest overall vacancy rates in the country as developers struggle to meet high rental demand agnst a backdrop of job additions and population influx.
Dallas: As new supply reduces rent hikes, Dallas remns the largest multifamily investment market over recent years. It also boasts the lowest average prime multifamily cap rate among markets. Expectations are that this tr will continue in 2024 making it the most liquid market for multifamily property investment.
Implications and Opportunities
The introduction of new apartments will inevitably affect rental rates, possibly leading to a slowdown in rent growth and a broader supply of affordable housing units as developers adjust their strategies to accommodate the changing landscape. This presents both challenges and opportunities - providing investors with more options to diversify portfolios while simultaneously influencing urban development policies.
In , the multifamily sector is poised for nuanced dynamics in 2024, marked by a gentle surge in apartment supply which will reshape market conditions across various locations. For investors, strategists, and policymakers alike, navigating these shifts requires a keen understanding of local economies and demand patterns, alongside anticipating the impacts on property value and rental markets.
: The content herein is and does not constitute professional advice or legal guidance. For specific market insights or investment strategies, please consult with real estate professionals or financial advisors.
This article is reproduced from: https://www.cbre.com/insights/books/us-real-estate-market-outlook-2024/multifamily
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Moderation of Rent Hikes in 2024 Gentle Surge in Apartment Supply Supply Pressures Limiting Rent Growth New Construction Peaks in Key Cities Improved Affordability for Renters Balanced Fundamentals Drive Demand