As apartment demand has fluctuated hugely over the past few years, each of the nation’s geographic regions have experienced their own performance patterns.
Over the next few weeks, RealPage Market Analytics will be exploring these regions, and the market performances of each in a series of blog posts.
In 1st quarter 2023, the U.S. apartment market marked a welcomed return of apartment demand, after posting negative absorption for three consecutive months.
Among the four regions, the South logged the most apartment demand in the January to March time period, with absorption for over 18,118 units. The South region has been a demand magnet for years as fast-growing Sun Belt markets allow the region to keep adding both new units and new residents. The West and the Northeast also posted positive absorption for 1,146 to 2,204 units, respectively, in 1st quarter 2023. The Midwest, by contrast, continued to log net move-outs, for 2,225 units.
The South
As the South claims many of the nation’s hottest Sun Belt markets and about 7.9 million existing apartment units, this region easily claims the strongest demand (and usually supply, too) for apartment units nationwide.
When apartment demand peaked in 3rd quarter 2021, the South recorded double the quarterly absorption tallies of the other three regions, absorbing nearly 134,000 units in the July to September time period alone. Then in 2nd quarter 2022, U.S. demand slipped into negative territory, and the South region likewise led in net move-outs, giving back notably more absorption than any other area. In 1st quarter 2023, apartment demand returned to every region. And, again, the South led that rebound.
The South is also the region with the most construction activity by far. Over 190,000 units were delivered here during the past year, and another 321,000 are expected to come online in the next year.
The Northeast
With just over 2.4 million existing apartments, the Northeast is the nation’s smallest region.* And the apartment performance here is relatively strong, anchored by a few tenured, steady markets.
Although the Northeast regained positive net absorption in the January to March 2023 time period, the region nevertheless suffered net move-outs over the last year. Compared to the other regions, the Northeast experienced the mildest net move-outs in the last year, giving back only about 10,300 units on an annual basis. Apartment demand here peaked at just over 28,000 units on a quarterly basis in 3rd quarter 2021 before dwindling to nearly stagnant absorption three quarters later – and net move-outs in the back half of 2022.
Supply in the Northeast typically runs lower than elsewhere, due to higher development costs, site availability and generally stricter building requirements. In the last year, just over 35,000 units completed in the region. That should jump up to over 56,000 units expected in the coming year.
*New York data has been excluded from Northeast region calculations, as this market’s behavior is not representative of typical regional patterns. Were New York’s data to be added to the analysis, the Northeast region would be double the current size, and weighted data from the nation’s largest city would skew the results for the region.
The Midwest
This characteristically slow-and-steady region has about 3.4 million apartment units. Unlike other regions, the Midwest still posted net move-outs in the January to March time period, though the deepest demand hemorrhaging appears to be in the rearview. The Midwest recorded net move-outs from over 2,000 units in 1st quarter 2023, weighing annual demand down to net move-outs from nearly 32,000 units.
Quarterly demand here peaked at just under 40,000 units in 3rd quarter 2021, though that quarterly rate fell by nearly half the very next quarter. This region has now logged four consecutive quarters of net move-outs. Still, true to its stable reputation, those net move-outs have been relatively mild. Thus, annual net move-outs here have not been as deep as in the South and West.
Annual completions here were relatively mild at around 46,000 units in the last year. In the coming year, another 68,000 units are expected to deliver.
The West
Home to about 5.3 million apartment units, the West is the nation’s second-largest apartment region. Apartment demand made a welcomed rebound here in 2023’s 1st quarter as the region absorbed just over 2,000 units. Still, after three consecutive quarters of net move-outs before that, annual demand here still lingers at net move-outs from over 58,000 units. That’s a far cry from the demand peak in 3rd quarter 2021 of nearly 68,000 units.
In year-ending 1st quarter 2023, nearly 86,000 units were delivered in the West. That rate fill nearly double in the coming year as another 165,000 units are expected to come online.
Up next, we’ll be examining occupancy across the nation’s four apartment regions.
