According to recent Redfin data, more than half (54%) of newly built apartments completed in Q1 were rented out within three months, rebounding from a four-year low of 47% a quarter earlier. That is still down from 58% a year ago and the second-lowest seasonally adjusted share to be reported in a quarter since mid-2020.
The improvement over the preceding quarter—which recorded the weakest absorption rate since the beginning of 2020—might indicate that property owners are drawing in tenants with lower rents and perks. Due to an increase in the construction of new apartment complexes, particularly in Sun Belt metros that were well-liked travel destinations during the epidemic, the absorption rate for new apartments has been slower this year than it was in the previous two.
“With only around half of new apartments renting out within three months, not only do renters have more choices, they also likely have the ability to negotiate a better deal,” said Sheharyar Bokhari, Senior Economist at Redfin. “There’s a huge number of new apartments opening up, and building owners are competing with one another to fill them up quickly.”
Further evidence that supply is marginally exceeding demand comes from the fact that the national rental vacancy rate for buildings with five or more units increased to 7.8% in Q2 from 7.4% a year earlier.
Percentage of New Apartments Rented Within Three Months
Q1 2024 Summary
- Studio – 58%
- One-Bedroom – 53%
- Two-Bedrooms – 53%
- Three-Plus-Bedrooms – 53%
Q1 2023
- Studio – 42%
- One-Bedroom – 58%
- Two-Bedrooms – 58%
- Three-Plus-Bedrooms – 65%
2023 → 2024
- Studio (+16 ppts)
- One-Bedroom (-5 ppts)
- Two-Bedrooms (-5 ppts)
- Three-Plus-Bedrooms (-12 ppts)
Studio Apartment Demand is Increasing as Completions Decline
Studio rentals filled up slightly faster than other bedroom kinds due to a decrease in inventory; within three months, 58% of the units were rented out, compared to 42% a year earlier. Only studio units saw a decline in completions in Q1, falling 7.1% from the same period last year.
By contrast, the percentage of newly constructed one- and two-bedroom apartments that were rented out in three months dropped to 53% from 58% in the previous year. Year-over-year, completion rates for both categories increased by almost 20% in Q1.
The rarest form of bedroom—new three-plus-bedroom apartments—experienced the largest decline from a year earlier, with 53% of them being rented out within three months as opposed to 65% a year earlier. This followed a slight 5% increase in completions.
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