Multifamily Market Stabilizes Earlier than Expected

  • After three quarters of softening, the national multifamily market stabilized in Q1—one quarter earlier than expected.
  • The overall vacancy rate rose by a minimal 20 basis points (bps) to 4.7% in Q1 and average rent rose 0.4%—the first quarterly increase in rent since Q1 2020.
  • Q1 market conditions remain weaker than a year ago, with average rent down by 4.2% and vacancy up by 50 bps. Nevertheless, Q1’s stabilization provides a solid foundation for recovery, especially in Q2 and Q3.
  • Seasonality, widespread vaccinations, an improving economy, additional fiscal stimulus and a return of office workers will all contribute to further multifamily market improvement over the next two quarters.
  • Although construction levels remain high, expected widespread gains in demand in coming quarters will blunt the impact of new deliveries.
  • Recently weaker market segments—including Class A assets, gateway markets and urban core submarkets—are poised to strengthen in quarters ahead. Many saw encouraging green shoots in Q1, such as a lessening of rent concessions.