Cleveland’s apartment market was one of the nation’s top revenue growth performers in the past year, despite net move-outs and declining occupancy.
The slow-and-steady Midwest markets have seen comparatively solid performance metrics of late, due to the region’s historic stability, and not because of great apartment demand. Cleveland doesn’t necessarily gain immediate attention from a young population, nor does it score high points in job growth opportunities on the national stage.
But the local culture in Cleveland is more unique than you might expect. This the home of the Rock & Roll Hall of Fame. Tycoon John D. Rockefeller started the oil refining company that would eventually become Standard Oil in Cleveland. And the city is home to a burgeoning theatre district that is the second largest in the U.S., after only New York’s Lincoln Center. Cleveland’s largest employment sector is healthcare, and the market is home to the Cleveland Clinic, ranked as the nation’s second-best hospital, after only the Mayo Clinic in Minnesota.
Economic diversity and historic stability have helped keep Cleveland’s apartment market ahead of national norms recently, and that can clearly be seen in revenue growth.
Apartment revenues in Cleveland climbed 2.4% in the year-ending April, according to data from RealPage Market Analytics. By comparison, U.S. revenue change was still negative, falling by 0.4% in that time period. Still, Cleveland’s revenue increase was down from the annual revenue gains near 11% seen in 2022.
Cleveland revenue change never fell into negative territory during the COVID-19 pandemic. While many major markets across the U.S. experienced revenue loss in 2020 and 2021, Cleveland continued to post gains, bottoming out at 0.8% in May 2020.
Several typically stable Midwest markets made the list for top revenue growth performers in the past year. Milwaukee, Chicago, Columbus, Kansas City and Cincinnati logged nation-leading revenue increases between 2.3% and 2.8% in the year-ending April. Outside the Midwest, Washington, DC logged the nation’s best performance of 3%, while Virginia Beach, Anaheim and Greensboro all saw revenues grow by 2% to 2.7%.
Unlike other markets on the list of revenue growth leaders, Cleveland has logged significant occupancy softening in the last year. Cleveland occupancy was at a still-strong 94.6% in April, but that was down 90 basis points (bps) year-over-year. Among the nation’s top 10 revenue growth performers, that was the worst annual occupancy decline. In Kansas City and Milwaukee, occupancy has softened 70 bps in the past year.
Softening occupancy in Cleveland means the outperforming revenue increase was bolstered by rent growth. Effective asking rents grew 3.2% in Cleaveland in the year-ending April. That was the second-best performance among the nation’s largest 50 apartment markets, following only Milwaukee. In comparison, U.S. rents increased only 0.1% in the same time frame.
Modest apartment supply has helped keep apartment revenues in the black in Cleveland. The market added about 1,300 units in the year-ending 1st quarter 2024, just a bit ahead of the 10-year average of about 1,200 units annually.
Meanwhile, Cleveland logged net move-outs for 485 units in the year-ending 1st quarter. That was dead last for annual demand performance among top 50 markets. But absorption is at least improving in Cleveland. On a quarterly basis, roughly 250 units were absorbed in 1st quarter, which marked a return to positive demand after two quarters of net move-outs. This was a positive sign of turnaround for the market as we head into prime leasing season.
