A Closer Look at Recent Occupancy Trends

Coming into 2025 it appeared that a slowdown in new supply paired with continued improvement in the demand environment would lead to a smaller annual decline in national occupancy than had been the case in each of the last few years. An outright increase in average occupancy seemed more likely for 2026.

As outlined in the recent ALN monthly newsletter, better-than-expected apartment demand in the first half of the year has accelerated the timeline on an average occupancy recovery. It is worth taking a closer look at recent occupancy trends and what they may portend for the second half of the year.

All numbers will refer to conventional properties of at least fifty units. For information on specific markets, sign up for our complimentary Market Review reports.

National View

National average occupancy had declined in the first half of the year for three straight years coming into 2025. In 2022, occupancy was just beginning the descent from the peak that occurred in late 2021. A 0.7% decline in the first six months of the year brought the national average occupancy to just over 93% by June of 2022. In 2023 the decline by mid-year was 1.3% – the steepest for that portion of the calendar in recent years. Last year, the retreat winnowed slightly with a 1% decline through June. By that time, average occupancy had fallen to 88%.

A 1% improvement in the first half of this year offset the slide during the back half of 2024 and returned average occupancy to 88% to end June. Occupancy has benefitted from both sides of the supply and demand equation this year. National new supply was about 40,000 units lower in the first half of 2025 than in the same portion of 2024. Meanwhile, net absorption through June of this year more than doubled last year’s total in the same period.

Stabilized occupancy change has mirrored overall average occupancy this year. For properties that entered 2025 already stabilized, a 1% gain by the midway point of the year brought the national average occupancy to 94%. Not since the middle of 2022, when it was on its long journey downward, has stabilized occupancy been so high to finish June.

Stabilized occupancy began its recovery last year – though, modestly. This year’s improvement marked a significant gain in momentum from the 0.2% increase during the first six months of 2024.

Price Class

All four price classes showed average occupancy improvement in the first half of the year. The change was fairly uniform across the tiers. Thanks to strong demand and reduced supply pressure, Class A led the way. A 1.4% gain brought the overall average back to 80% to end the first half of the year.

For Class B, a 0.9% increase resulted in an average occupancy of just over 86% to end the period. Both the Class C and Class D subsets saw average occupancy rise by 1% and each closed June at just below 91%.

For the top of the market, apartment demand has continued positive momentum from last year and has also been aided by the slowdown in deliveries. For the workforce housing segments, occupancy improvement has come thanks largely due to apartment demand moving from tepid to strong.

Looking Ahead

Multifamily average occupancy has multiple macro trends in its favor at the moment but also faces some risk due to uncertainty in the broader economy. One positive trend has already been mentioned – a decline in new supply.

After a surge in deliveries over the last couple of years that reached a level not seen in decades, the much-awaited slowdown has seemingly arrived. The spigot has not been turned all the way off, but deliveries should continue to recede this year and are likely to winnow further next year. This will allow some breathing room for the industry where steady demand can finally chip away at elevated vacancy.

Another positive macro trend is simply the multi-year positive momentum for apartment demand that is already in place. National average occupancy change, while negative in each year from 2022 through 2024, moderated its decline in each of those years. This occurred despite increased new supply thanks to steadily improving apartment demand.

The steady improvement in apartment demand has persisted during a period of volatility outside the industry. A challenging interest rate environment, a national election, war on multiple continents, major changes to trade and immigration policy – and more. On the positive side, significant headway has been made with inflation despite the recent modest uptick.

Uncertainty and headwinds remain, but short of a paradigm-changing event from outside of the multifamily sector, demand momentum appears to have every chance of continuing in the coming months.

Takeaways

National average occupancy gained ground in the first half of the year for the first time since 2021. This occurred thanks both to moderating new supply and improved apartment demand. The upswell in demand was observed widely, both geographically and with respect to price class. With deliveries expected to slow further in the back half of the year, and with a few months left of the typically stronger leasing season, further improvement may well be in the cards in the coming months.

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