CBRE: Multifamily Market Sees Vacancy Rate Decline

(Image courtesy of CBRE; Breakout image courtesy of Kelly/pexels.com)

CBRE, Dallas, reported the U.S. multifamily market’s vacancy rate fell in the third quarter for the first time in more than two years, with renter demand outpacing new supply deliveries.

The vacancy rate fell in Q3 from Q2 to 5.3%. That’s closer to the long-run average of 5%; CBRE anticipated it will reach that mark in coming quarters.

All asset classes saw lower vacancies, with Class A falling to 5.6%, Class B to 5.2% and Class C to 5.3%.

Positive net absorption–the change in the number of occupied units–was one of the strongest third quarters in the past four decades with 153,000. That’s also 72% above the pre-pandemic Q3 average.

Quarterly demand surpassed new completions for the second straight quarter.

We’re reaching the end of a construction boom, in which a record level of 473,300 new units have been delivered over the past year. In Q3, construction completion was marked on 124,300 units. But, construction starts have slowed significantly.

“The first drop in vacant units in more than two years signals a crucial turning point in the multifamily sector. This boost will lead to increased investment activity in 2025 as improving fundamentals continue to drive investor confidence capital deployment,” said Kelli Carhart, Leader of Multifamily Capital Markets for CBRE.

Average monthly rents rose 0.3% year-over-year, to hit $2,203. CBRE anticipated average annual rent growth will accelerate alongside the higher occupancy rates.

Multifamily investment volume decreased in Q3 from Q2 to $34.2 billion.