Apartment occupancy performances have varied across the nation’s four geographic regions recently. Apartment living varies across the Northeast, West, South and Midwest, and each region has grappled with fluctuating demand patterns over the past few years.
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. Read the first in this series, covering apartment demand by region.
In 1st quarter 2023, the U.S. apartment market overall welcomed the return of apartment demand, after posting negative absorption for three consecutive quarters. Still, one quarter of rebounding demand wasn’t enough to pull the nation out from under the weight of net move-outs on an annual basis. Meanwhile, apartment supply continues at record levels. This disparity led to occupancy decline of 270 basis points (bps) in the past year, taking U.S. apartment occupancy down to 94.8%, well below the nation’s five-year average of 95.9%.
Among the four regions, the South region experienced the deepest occupancy decline during the past year, falling 330 bps to 94%. The West and the Midwest recorded more mild setbacks of 230 to 270 bps, while the Northeast logged a more modest decline of 180 bps.
The South
At 94%, 1st quarter occupancy in the South region is the lowest nationwide, after taking a deep dive of 330 bps in the past year. The five-year average for this region is a bit higher at 95.2%. Characterized by warm weather and a lower cost of living, the South region has boasted significant attention in the past few years, driven by job opportunities and population increases. While the South region has been the nation’s apartment demand winner of late as the fast-growing Sun Belt markets continue to add new residents, this is also the region with the most new construction activity – by far. Over 190,000 apartment units were delivered in the South during the past year, and such vibrant competition has stifled occupancy progress.
The West
Apartment occupancy came down by 270 bps year-over-year in the West region, leaving the rate at a still-respectable 95% in 1st quarter. That performance was about in line with the national average but trailed the region’s five-year norm closer to 96%. The West region apartment markets are attractive to affluent populations, with large tech hubs and scenic landscapes that drive prices upward (and can create affordability challenges). While apartment demand made a welcomed rebound in the West in 2023’s 1st quarter, annual demand here still lingers in negative territory. Net move-outs from 58,000 units in the past year occurred while 68,000 new apartments were delivered.
The Midwest
Occupancy didn’t falter quite as much in the Midwest region, falling by 230 bps in the past year to a second-best nationwide rate of 95.3%. That is a bit behind the five-year Midwest region norm of 96.1% but is a few ticks ahead of the U.S. average of 94.8%. Standing on historical stability and attractive pricing, the Midwest apartment market tends to perform on an even keel, even in the worst of times. While net move-outs did compress absorption in the past year, the decline was not terrible at a loss of about 32,000 units. Meanwhile, completions across the Midwest remain relatively mild, at less than 50,000 units.
The Northeast
Apartment occupancy in the Northeast tops any other region nationwide, with a solid 1st quarter rate of 96.2%. The Northeast saw the mildest decline in the U.S. during the past year, with occupancy falling by just 180 bps. Today’s rate in the Northeast is just a bit shy of the region’s five-year norm of 96.7%, but well ahead of the U.S. average. Known for its vibrant urban centers and cities with dense populations, the Northeast region of the country tends to log better occupancy rates than other regions.* The Northeast experienced the mildest net move-outs in the last year, giving back only about 10,300 units. At the same time, just over 35,000 new apartment units completed in the region, the smallest volume nationwide.
*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.
Up next, we’ll be examining supply across the nation’s four apartment regions.