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CBRE Forecasts a Brief Multifamily Glut

The number of multifamily apartments being built in the United States has risen to above 750,000, the greatest level since the 1980s housing boom. The delivery of a nearly record-breaking number of new multifamily housing units in the U.S. over the next two years will result in a short-term oversupply, but a recent study from CBRE maintains that the new supply is necessary to manage the sector’s long-term fundamentals. By year’s end, the construction boom is anticipated to raise the overall vacancy rate for the multifamily sector over equilibrium, to a peak of 5.2 percent from 4.6 percent. While vacancy rates surge just little above their long-term average of 5.0 percent, CBRE anticipates that demand for rental homes will increase this year.

Over the next two years, it is anticipated that the current development surge will increase the overall multifamily inventory in the United States by 4.2 percent. Even while the sector’s net absorption has been negative over the previous three quarters, demand is anticipated to become positive in the first half of 2023, limiting the degree to which rising vacancies could affect rent increases. As compared to the long-run average of 2.5 percent, CBRE expects rent growth of 3.5 percent for the year, down from 6.7 percent in 2022 and 13.4 percent in 2021, although this is still a relatively strong rate.

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