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Radix Multifamily Insights: March 2023 Edition

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Radix Multifamily Insights: March 2023 Edition

Picture of Chris Nebenzahl

Chris Nebenzahl

In the first quarter of 2023, the multifamily industry has seen a strong growth in traffic, indicating a pickup in demand for multifamily housing ahead of the prime rental season. While leasing activity has also increased, it hasn’t quite followed the same pace as traffic, resulting in a lower closing ratio. Nevertheless, with both traffic and leasing on the rise, occupancy has remained steady at around 94.3 percent.

However, occupancy has dipped slightly due to new supply, particularly in Sunbelt markets like Texas, Carolina, Florida, and Phoenix, where there are over a million units currently under construction. Although supply pressure is evident across the country, it is most concentrated in these markets. Gateway markets, on the other hand, have done quite well, with New York, Washington DC, Chicago, and Los Angeles experiencing an increase in net effective rents (NER) by more than one percent. Boston, however, is the only Gateway market that is lagging behind the national average by 80 basis points year to date.

Chris Nebenzahl, explains that this is particularly significant since the first quarter tends to be a soft or negative quarter for rent growth in most of the country. So, having Gateway markets outperform Sunbelt markets on rent growth is an excellent indication for these markets, considering that they have been struggling for the past two to four years even before the pandemic.

At the national level, rent growth has only increased by 10 basis points since the beginning of the year. While this isn’t a huge growth rate, it is a good sign, especially as we move into the prime rental season. The next three months, which comprise the second quarter, is typically the best quarter for rent growth and property performance. However, there may be some struggling at the micro level, particularly with lease-up properties that are still in the lease-up phase and may offer concessions to tenants.

Overall, Radix’s multifamily insights show good fundamentals as we kick off the year, but the industry will need to combat new supply and other challenges in the coming months.

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