Monday Morning Scoop - Multifamily Sees Record-Breaking Absorption in Q4
Multifamily Sees Record-Breaking Absorption in Q4
Fourth-quarter multifamily net absorption reached record levels, closing the year with absorption of 183,600 units, a 13% quarter-over-quarter increase and a 118% year-over-year increase, according to CBRE’s Q4 multifamily report.
Annual net absorption stood at 530,600 units, which is more than double the 248,800 units absorbed in 2023. That is only 14% less than record annual absorption in 2021. Demand outpaced 114,000 new units by 61% in the fourth quarter and outpaced 451,000 new units by 18% for the year.
CBRE tracks 69 markets, all of which recorded positive net absorption during the fourth quarter, the first year this has happened. Markets typically record low or negative net absorption in the fourth quarter, the company said. New York, Houston and Dallas led all markets with 18,600, 10,400 and 8,800 units absorbed respectively.
All but three of the top 15 markets grew net absorption by more than 3%, exceeding the national average of 2.6%. Five of the top 15 markets have construction pipelines that are more than 15% of existing inventory, said the report.
For the year, all markets recorded positive net absorption, led by New York with 41,700 units, Houston with 27,600 and Dallas with 27,400 units.
Over the past year, all but four of the top 20 markets for new supply have seen more absorption than completions. Those four markets are Austin, Orlando, Tampa and Minneapolis. This represents a complete reversal from Q3 when only Washington, D.C., had demand outpacing supply.
The overall vacancy rate fell to 4.9% during the fourth quarter, which is slightly below its long-run average of 5%. Vacancy rates in 30 markets are now below their pre-pandemic average, an increase from 19 in the third quarter and 14 in the second quarter. Sixty-three markets had quarter-over-quarter vacancy rate decreases up from 49 in the third quarter. Only Denver and West Palm Beach had vacancy rates increase during the quarter. Meanwhile, Providence and New York had the lowest vacancy rates at 2.4% and 3.1% respectively.
All asset classes saw lower vacancy for the quarter. Class A fell to 5.3%, Class B to 4.8% and class C to 4.9%. Still, vacancy rates for all three classes are 40 to 90 bps higher than Q1 2020 levels.
Average monthly rent grew by 0.5% year over year to $2,176. Quarter-over-quarter rent fell by 1%, in line with typical seasonal performance. The Midwest led positive year-over-year rent growth at 2.8%, followed by the Northeast with 2.3% growth and the Pacific with 0.4% growth. Negative year-over-year rent growth moderated to -1.1% in the Southeast and -2.5% in the South Central regions. Negative net growth accelerated in the mountain regions to -2.8%.
The multifamily sector accounted for the largest share of commercial real estate investment volume for both the fourth quarter and full year at 36%. Los Angeles was the top market for investment volume with 9.6 billion followed by New York with 9.3 billion and Dallas-Fort Worth with 8.5 billion.
By: Kristen Smithberg
Source: GlobeStreet