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These 5 Cities Could See Over 3% Apt. Rent Growth
RealPage updated its 2024 rent forecast in light of positive economic indicators.
Jordan B. & Han-Gwon Lung
April 10, 2024
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Good morning. RealPage's latest forecasts suggest a 1–3% increase in multifamily rents across most major U.S. cities this year. Meanwhile, the Inland Empire's industrial market is outperforming, with a notable 12.7% rent growth, highlighting it as a national leader.
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Market Snapshot
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RENT REPORT
Multifamily Rent Growth Forecast Gets a Boost
RealPage has updated its 2024 forecast in light of positive economic indicators, indicating a slight improvement across the nation's 50 largest apartment markets.
Stronger rents: According to the latest analysis, a notable portion of the country's largest 50 apartment markets is poised for rent increases. Specifically, 12% of these markets are expected to see rent growth of 3% or more.
By the numbers: A majority are forecasted to have rent increases between 2% and 2.9%, while 38% could experience growth ranging from 1% to 1.9%. Only a small fraction, 8%, might see growth under 1%. These projections are grounded in the latest economic data and anticipated trends.
Labor market momentum: The U.S. economy's strong performance, particularly in job creation, plays a significant role in these forecasts. The last quarter of 2023 saw over 637,000 new jobs, with the momentum continuing into 2024 as over 500,000 jobs were added in just the first two months. LA, NYC, and Houston led job creation in 2023. Houston and Austin led job growth in early 2024, adding 16.6K and 10.7K jobs, respectively.
➥ THE TAKEAWAY
Forecasting a recovery: Despite ongoing concerns about higher-than-desired inflation, there's speculation that the Federal Reserve might lower interest rates in the second half of the year. This decision, however, remains dependent on the labor market's performance. The U.S. economy, which grew by 3.2% in the last quarter of 2023, is expected to slow down slightly in 2025, with GDP growth projected to fall between 2.4% and 2.7%. Nevertheless, consumer spending, which has shown increases in the early months of 2024, and anticipated retail sales growth of about 2%, are expected to keep driving the GDP forward.
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✍️ Editor’s Picks
The struggle is real: Half of U.S. homeowners and renters struggle to afford housing, resorting to skipping meals, ignoring medical needs, and selling possessions to keep the lights on.
Land and expand: Blue Owl Capital is acquiring real estate lender Prima Capital Advisors for $170M, expanding into the real estate financing business.
Real estate recession: After the pandemic subsided, high-value real estate transactions in San Francisco above $10M dropped 45%, impacting the city’s transfer tax revenue in a big way.
Everything the light touches: AI's transformative power in nearly all industries is driving growth as more U.S. firms actively pursue AI integration, aiming for efficiency and cost savings.
🏘️ MULTIFAMILY
Luxury living: An $83M construction financing deal was secured for the luxury 253-unit Bayside Sarasota project, set for Fall 2026.
Reevaluation: A recent Florida Legislature session ended with new bills impacting properties—historic properties face demolition, local control shifts, and rental rules tighten.
Reviving hope: The Lirio project in NYC’s Hell's Kitchen secures $104.5M to build 112 affordable housing units, including retail and office space.
Affordable accelerator: LA Mayor Karen Bass aims to fast-track affordable housing with Executive Directive 1, despite concerns from developers.
🏭 Industrial
Industrial surge: LA leads industrial transactions with $435M in sales as CenterPoint adds a cool $196.5M in South LA acquisitions.
Data center tax breaks: Minnesota lawmakers propose new tax breaks for large-scale data centers to boost the state economy and attract new investments.
Inland Empire incline: SoCal's Inland Empire market sees a 5.9% vacancy rate, marking seven consecutive quarters of increasing vacancies.
Easy money: Cohen Asset Management buys a 120KSF industrial property in Arizona for $21.8M at $181.67PSF.
🏬 RETAIL
State of malls: Dive in to see where customer behaviors are changing, why malls are returning to pre-COVID levels, how experiences are driving traffic, and much more. (sponsored)
Fashion reboot: Mega-retailer Uniqlo, owned by Japan’s Fast Retailing, plans to double its U.S. stores by 2027 after a 44% revenue increase to $1.08B.
Esplanade enchantment: Primestor buys the 357KSF Esplanade Shopping Center in Oxnard for $90M, about 5% less than its previous purchase price, at $252PSF.
🏢 OFFICE
Tax tango: Boston Mayor Michelle Wu is proposing a temporary commercial tax increase to shift the city’s budget responsibility from residences to offices.
Office crisis: Federal government agencies in Washington, DC use only 12% of their available office space, as reported by the Public Buildings Reform Board.
AI expansion: ChatGPT creator OpenAI seeks a 400KSF office expansion after subleasing 487KSF from Uber (UBER) at 550 Terry Francois Blvd.
🏨 Hospitality
Goose Island shuffle: Chicago developer R2 sold part of its Goose Island site to BA Investment Advisors for $5.8M, abandoning its former dining complex plans.
East coast rising: East Coast hotels are leading transaction volume this year, with Miami ranking first. But this year’s top sales all come from one major deal.
PROPERTY REPORT
Industrial Markets With the Best Fundamentals
According to data from Yardi Matrix, the Inland Empire leads the pack with a 12.7% in-place rent growth, highlighting the resilience of industrial markets post-pandemic.
Top performers: Despite a slight dip, the national average rent remains strong at $7.68 per square foot, marking a 7.5% increase year-over-year. The sector's average vacancy rate stands at a healthy 5.0%, reflecting a balanced market. Industrial spaces have seen a nationwide boom, particularly in select regions, driven by a combination of demand and new developments.
Top Markets by In-Place Rent Growth:
The Inland Empire tops the chart, maintaining its lead with a significant 12.7% growth and a 6% vacancy rate, despite a cooling period signaled by an increase in vacancies from previous lows.
Miami follows closely with a 12.0% growth rate and a lower 4.6% vacancy, showing strong demand.
Orange County and Los Angeles both show an 11.4% growth with vacancy rates hovering around the 4.5% mark, indicating a tight competition.
New Jersey rounds out the top five with a 9.1% growth and a 4.7% vacancy rate, showcasing its strength in the industrial market landscape.
Construction trends: Orange County leads in average rates per square foot at $19.64, followed by Los Angeles, Bay Area, and Miami, reflecting a premium on space in these areas. The construction landscape remains active, with over 419.8 million square feet under construction nationally. Phoenix, Dallas, and Charlotte are among the top for new industrial construction, illustrating a shift in focus towards these emerging markets.
➥ THE TAKEAWAY
Big picture: The industrial real estate market is witnessing a shift, with areas like the Inland Empire and Miami leading in growth. New construction trends indicate a broadening horizon for industrial development. This shift, coupled with cooling measures like increased interest rates and stricter loan standards, points to a more balanced market ahead.
📈 CHART OF THE DAY
Chicago's suburban investment-grade office market now boasts lower direct, sublet, and total availability rates compared to downtown, marking a first since downtown's direct availability rate started climbing significantly in 2023, while its suburban counterpart stayed relatively stable.
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