Multifamily Sector: 2024 Key Takeaways
The U.S. multifamily real estate sector demonstrated robust performance in 2024, marked by significant absorption, a surge in new deliveries, and a dynamic shift in construction activity.
Absorption and Demand: The year witnessed the absorption of over 436,000 units, reflecting a 72% increase compared to 2023 and standing 56% above the 2017-2019 average. Notably, all 90 markets tracked by Cushman & Wakefield reported more net move-ins than move-outs, with the Sun Belt region leading this growth.
Vacancy Rates: Despite the strong demand, the influx of new apartments led to a 40 basis points (bps) increase in vacancy rates, bringing the national vacancy rate to 8.9% in the fourth quarter—the highest recorded since 2000. This rise was primarily attributed to the delivery of over 530,000 new units throughout the year.
Rent Growth: Rent growth remained modest yet positive, fluctuating between 1.5% and 2.0% since the second quarter of 2023. While this is below the historical average of 3.7% observed from 2010 to 2019, it indicates resilience in rental rates amidst increased supply. Regions such as the Northeast and Midwest experienced higher rent growth, averaging 2.9% and 3.8% respectively, with markets like Milwaukee, Cleveland, and Stamford leading with year-over-year increases of 4.8%, 4.7%, and 4.4%.
Construction Activity: The construction pipeline experienced a notable decline, with activity falling 40% from its peak. New starts decreased to approximately 230,000 units—the lowest level since 2012—due to factors such as high interest rates, weaker effective rent growth, and rising replacement costs. This reduction in new developments is expected to create a tighter supply environment over the next three to four years.
In summary, the U.S. multifamily market in 2024 showcased strong demand and absorption, a peak in new deliveries leading to higher vacancy rates, modest rent growth, and a significant slowdown in construction activity, setting the stage for a potentially tighter supply landscape in the coming years.