Finance  ·  Analysis

Report: Record Multifamily Deliveries Constricting Rent Growth

A total of 376,500 units have hit the market over the last four quarters, the most CBRE has ever documented


Has multifamily become too much of a good thing for investors? 

The asset class’s strong run continued in the third quarter of 2023, with new deliveries reaching 114,600 units nationally and net absorption cresting 82,100 units, according to CBRE (CBRE). But the strong supply growth is impacting rents, which grew at less than 1 percent year-over-year. 

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The anemic rent growth in multifamily housing pales in comparison to the first quarter of 2021, which saw average national increases of 15 percent year-over-year for the popular asset class. Moreover, a majority of markets in the Southeast, Southcentral, Mountain and Pacific regions all saw negative average rent growth in the third quarter, according to CBRE data. 

“Markets with the most constructions saw the biggest declines in rent growth,” the CBRE report stated. “Average rent growth likely will be flat for the year and begin to rise in the first half of 2024.” 

Despite not growing much, rents will remain high in 2023. The average monthly rent in the U.S. is $2,184 and is expected to remain flat for the year.

The big story for multifamily has been the unrelenting pace of new supply that has entered the market in 2023. New deliveries of 114,600 units in the third quarter brought the trailing four-quarter total to 376,500 new units — the largest amount recorded since CBRE began tracking new deliveries 27 years ago. CBRE noted that a construction slowdown in recent quarters is likely to limit the supply of new deliveries beginning in 2025. 

The top five markets for new deliveries over the past quarter were New York, Dallas, Washington, D.C., Austin and Los Angeles. These five markets accounted for 25 percent of all new deliveries nationally. 

Net absorption — which measures the amount of units leased minus the amount vacacted — reached 82,100 in the third quarter, led by New York, Dallas and Austin, which saw quarterly positive net absorption of 6,200 units, 6,000 units, and 5,300 units, respectively. 

“Net absorption increased in 33 markets quarter-over-quarter, including six of the nine markets with negative net absorption in the second quarter,” the CBRE report stated. “[Net absorption totals] reflected a rebound in typical seasonal demand this summer that had been lacking in 2021 and 2022 when the market was adjusting to pandemic–related migration patterns.” 

Even though the fundamentals of multifamily remain strong, there are big-picture worries. 

National multifamily investment sales volumes decreased by nearly 9 percent quarter-over-quarter and have hit only $29 billion through the first nine months of the year. By comparison, national multifamily investment sales volumes stood at nearly $76 billion this time last year. 

While these investment sales totals might strike fear into the hearts of multifamily investors, they reflect even more poorly on the wider commercial real estate environment. 

Despite shrinking to its lowest quarterly volume in three years, the multifamily sector accounted for the single largest share (34 percent) of all CRE investment sales transactions through the third quarter of 2023. This is down from the 38 percent share the multifamily sector held in investment sales volumes between 2020 and 2022. 

Brian Pascus can be reached at