A Bumpy First Half of the Year Comes to a Close

Jordan Brooks
July 11, 2023
The halfway point of the year has now come and gone, making this month a perfect time to pause and evaluate how the first six months of 2023 played out for the multifamily industry. Following a 2022 that was disappointing on the apartment demand front, though not in rent growth, this year has had its share of challenges.
Net absorption has remained underwhelming, and rent growth continued to flag after an incredible run of nearly two years in the face of falling occupancies.
All numbers will refer to conventional properties of at least fifty units.
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New Supply and Net Absorption

One notable development in the first half of the year, and one that is likely to continue into next year, was the increase in new supply. Deliveries through June have been about as expected, but aImage

Average Effective Rent and Lease Concessions

Average effective rent for new leases rose by just under 2% in the first six months of the year. This was below any recent year with the exception of 2022 but was certainly respectable given the absorption and occupancy realities. Effective rent growth has been solidly positive for five consecutive months after briefly moving into negative territory during the winter. More than that, rent growth has ticked up for two straight months – though by a small margin.

Market Notes

On a net rent basis, accounting for both occupancy and rent change, it has been the smaller markets that have fared better so far this year. In general, less pressure from the construction pipeline and net absorption that has been at least in positive territory has allowed many of these markets to maintain their relatively high occupancies and continue to capture rent growth. Areas like Midland – Odessa, TX, Roanoke, VA, Augusta – Portland, ME, Northwest Arkansas, and Springfield, IL would fit this bill.

On the other end of the spectrum, some markets have struggled with the combination of active deliveries and negative net absorption. For New York and Los Angeles, around 10,000 new units each have been met with a net loss of about 3,200 and 2,400 leased units respectively. Similarly, almost 7,500 new units in Atlanta were delivered as the markets suffered a net loss of approximately 1,100 leased units through June.


The first half of the year has been something of a bumpy ride for the multifamily industry. Sluggish demand paired with a significant increase in new supply has led to a steady decline in average occupancy and further momentum coming out of rent growth.
Much is somewhat of an unknown for the back half of the year. The labor market has remained tight, but cracks have begun to emerge. Manufacturing activity and other leading indicators for economic performance have started to soften. The return of student loan payments in October will have an effect on the industry, but to what extent and how widespread the impact remains to be seen. elevated inflation persists, but progress has been made and there is reason to think the decline of recent months may continue.
There is also the issue of seasonality. 2023 had appeared to be reverting to a more-normal seasonal pattern with apartment demand ramping up in the spring out of a slower winter. However, the precipitous decline nationally in June does not fit the usual seasonal pattern. One month could be an outlier, but the June number should be counted as a red flag.
As the second half of the year unwinds, one certainty is that new supply will not be slowing. Expectations are for at least as many new units to be delivered in the final six months of the year as were delivered in the first six months. With the likelihood being that the same symmetry will not ultimately the case for apartment demand – seatbelts should remain fastened.
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