Next up in the current series looking back at 2024 multifamily performance is apartment demand. If you missed it, be sure to catch up on the article detailing last year’s new supply.
All numbers will refer to conventional properties of at least fifty units. Additional market-specific information is available for free when you sign up to receive any of our Market Review reports.
National Apartment Demand
Just over 285,000 net units were absorbed across the country in 2024. This was approximately 84% higher than the 2023 total and more than quadrupled net absorption from 2022. Despite strong improvement in recent years, net absorption in 2024 remained lower than in the years immediately preceding the pandemic. This shortfall occurred despite national multifamily stock growing by more than two million units from the end of 2019 to the end of 2024.
An encouraging aspect of last year was the broad-based nature of the improvement in net absorption. Year-over-year gains were achieved across all four price classes, for stabilized properties, and for large and small markets alike.
For properties that entered 2024 already stabilized, net absorption totaled about 61,000 units. This gain in leased units followed a two-year period in which stabilized properties suffered a net loss of more than 270,000 leased units.
Apartment demand grew notably in the workforce housing segments as well. This was a welcome development because this subset of the industry had been a drag on national apartment demand in 2022 and in 2023. Class C net absorption finished 2024 at nearly 90,000 units – more than double the 2023 total. For Class D, a net gain of around 8,000 leased units was not a substantial number. And yet, it followed a combined loss of about 75,000 leased units in the previous two years.
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Apartment Demand at the Market Level
As with the new supply rankings, the top markets in apartment demand last year were highly skewed toward the Sunbelt. Of the top ten markets in annual net absorption, only Washington DC (8th) was not in the Sunbelt.
Top markets included usual suspects like Dallas – Fort Worth and Atlanta as well as Los Angeles – Orange County. Houston, Austin, Orlando, Raleigh – Durham, Charlotte, and Nashville rounded out the top ten.
On a size-adjusted basis, the Mountain West continued to do quite well last year. Evaluating net absorbed units as a share of existing stock is a straightforward way to adjust for market size. Smaller Sunbelt markets like Abilene, Myrtle Beach, and Huntsville were among the leaders. However, the Mountain West claimed six of the top ten markets. These included Boise, the state of Montana, Rapid City, Salt Lake City, Reno, and Sioux Falls.
Primary markets, of course, accounted for most of total net absorption. Roughly three-fourths of 2024 net absorption occurred in primary markets. However, differences between primary, secondary, tertiary, and micro markets shrank in the size-adjusted metric. In fact, secondary markets slightly edged out the primary markets for the top spot. Micro markets, which had been the laggard group in 2023, managed to triple size-adjusted net absorption in 2024 and finished just ahead of tertiary markets.
Takeaways
Apartment demand last year provided reason for optimism in the medium term for the multifamily industry. 2024 provided a second straight year with robust demand growth, and further closed the gap with pre-pandemic net absorption.
Especially encouraging was the fact that the 2024 gains were not concentrated in just one or two subsets of the broader industry. Demand grew in small markets, in large markets, and across all four price classes. After shedding leased units for two years in a row, stabilized properties managed to gain ground as well. This all bodes well for apartment demand in 2025.
There is one important caveat, however. Even with another jump in apartment demand this year, national average occupancy may not begin its long-awaited rebound. New supply, although expected to be lower than in 2024, will continue to be a major force this year. Apartment demand would have to be well above the typical range to fully offset anticipated deliveries. Even so, a rising tide of demand paired with visible light at the end of the tunnel for the current development cycle provides cause for optimism over the next few years.
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