Newmark Finds Surging Multifamily Demand

(Illustration courtesy of Newmark)

Newmark, New York, reported multifamily demand surged in the first quarter with nearly 104,000 units absorbed–the largest first-quarter total since 2000.

The first quarter outpaced the long-term first-quarter average of 38,005 units by 2.7 times. “Additionally, rolling four-quarter demand accelerated to 317,241 units, the highest level since the second quarter of 2022,” Newmark’s United States Multifamily Capital Markets Report said.

The report noted new supply continues to break records, with 135,652 units delivered in the first quarter, breaking the previous largest quarterly sum in fourth-quarter 2023. “New deliveries are expected to continue to accelerate in the second and third quarters of 2024 before decelerating in the fourth quarter of 2024, where a reversion to the mean is expected,” Newmark said. “Based on annual average absorption, several Sun Belt markets with robust pipelines of new deliveries in 2024 are expected to take upwards of two to three years to absorb.”

The apartment vacancy rate rose 66 basis points year over year to 5.9% nationally, the report found. This represents the ninth consecutive quarterly increase in vacancy, but the pace of growth is slowing on an annualized basis.

“Multifamily debt originations declined to the lowest level since 2015,” Newmark said. “While recent activity has been lackluster compared to pre-pandemic levels, originations in the first quarter of 2024 were down just 7% year over year, suggesting that activity may be close to bottoming. Additionally, $669 billion in multifamily loans mature between 2024 and 2026.”

Newmark found that investment sales volume totaled $20.6 billion in the first quarter, down 25.3% year over year. Sales volume on a rolling four-quarter basis declined to $113.0 billion, the lowest point since the fourth quarter of 2014 and 42.2% below the long-term average; however, multifamily remains the largest share of investment sales of all U.S. commercial real estate property types at 26.2% through the first quarter.