Apartment Demand Continued Its Slide in March

Since the early days of the COVID-19 pandemic around the spring of 2020, there have been a few key shifts in national multifamily dynamics.

First, apartment demand began its recovery in the summer and fall of 2020, and that momentum continued through the fourth quarter before exploding in 2021. The incredible demand of 2021 drove the second shift – rent growth reemerged in the spring of 2021 and had skyrocketed to double digit annual growth by the end of the year.

The third shift occurred in the first quarter of 2022. Rent growth remained well above the typical level for the time of year, clocking in at nearly 3% nationally, but apartment demand finally experienced a cool down. In fact, Q1 2022 net absorption was lower than that just from the month of March in every year of the last five with the exception of COVID-impacted 2020.

A more detailed look at the quarter will be the topic of the month’s upcoming ALN newsletter, but in this space, we’ll evaluate specifically the month of March.

As a reminder, all numbers refer to conventional properties of at least 50 units.

New Units and Net Absorption

Around 26,000 new units were delivered across the US in March. This level of new supply marked a considerable decrease from the more than 40,000 units delivered last March as well as the approximately 32,000 units delivered in March of 2020. This year’s total was much more in line with the same period in 2018 and 2019. Construction delays and cost issues continue to be an issue for the industry, so a slowdown in delivered units is not unexpected.

What has been maybe a bit more unexpected, though we’ve been discussing it for a couple of months now at ALN, is that a slowdown in apartment demand has become a trend rather than a single month data point. Just over 14,000 net absorbed units nationally in March was the lowest value of the last five years, even lower than March 2020, and totaled less than half of the units absorbed in March of 2018, 2019, and 2021. Fortunately, the simultaneous slowdown in deliveries meant that average occupancy regressed only very slightly to finish the month still near 94%.

Compared to last March, the most dramatic decline was in the Class C segment with a decline of almost 90% in net units absorbed. Even so, Class B absorption fell more than 70% compared to March of 2021 and Class A demand fell by just under 40%. Only Class D outperformed, but that subset managed a net change in leased units of less than 500 units.

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Average Effective Rent and Lease Concessions

As already mentioned, unlike apartment demand, rent growth has not changed trajectory yet. Average effective rent rose by 1.2% nationally during the month for new leases, easily outpacing anything from the last five years for March. Despite a net loss of more than 5,000 leased units, properties that entered 2022 already stabilized added 1.1% to average effective rent in the period. Of the four price classes, only Class D failed to touch at least 1% rent growth in March. Class A and Class B each added 1.4% at the average, and the Class C subset saw a 1% gain.

Only 8% of properties ended the month offering a lease concession for new leases. This level of discount availability was less than half that from March 2021 and the lowest value of the last five years by a wide margin. The average discount value, calculated only from properties offering a lease concession package, closed the period at just over three weeks off an annual lease. This represented a decrease compared to last March but remained elevated slightly compared to previous years.

Class A properties, with almost 15% of properties offering a discount, continue to be where lease concessions are most relevant. For Class C and Class D properties, availability remained below the national average of 8%. Similarly, in the bottom two price tiers the average concession value ended the month below three weeks off as 12-month lease, while Class A led the way with an average value of about 3.5 weeks off an annual lease.


Now that we are into the spring months and approaching summer, whether the typical seasonal bounce in demand materializes or not will likely be a major component of the industry’s performance this year.

Rent growth has persisted at an unusually high rate, thanks in part to higher average occupancy than normal. However, factors such as reduced evictions, increased resident cash flow during the pandemic, and now a slowdown in new deliveries have all contributed to that occupancy. With the exception of new deliveries, those features of the market are now in the past. Should net absorption not improve in the next couple of months, it seems increasingly likely that rent growth will finally begin to lose some steam.

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