Multifamily brokerage firm Berkadia just published their 2025 Outlook Memo. Here's what it said:
1. Fundamentals to Improve in 2025;
More than 508,125 units are on pace to begin lease-up across from the U.S. in 2025, down from the 599,200 units added in 2024.
2. It's Still Sunny in the Sun Belt;
The Sun Belt remains a popular target for developers with four out of the five top markets for deliveries including Dallas-Fort Worth, Phoenix, Austin, and Charlotte. While U.S. deliveries taper this year, apartment leasing activity is projected to accelerate as the homeownership market remains competitive due to high interest rates and limited inventory listed for sale.
3. Occupancy Notching Even Higher;
After 557,100 net units were absorbed in 2024, more than 580,500 new leases are forecast to be signed than move-outs this year. The increase in leasing activity combined with more than half of all renters renewing their leases will underpin a forecast 50-basis-point rise in occupancy this year. By the fourth quarter of 2025, the occupancy rate is forecast to average 94.8%. The rise will place occupancy higher than the pre-pandemic growth cycle average of 94.6% in the fourth quarters between 2010 and 2019.
4. Return of Positive Rent Growth;
Healthy occupancy will support an increase in rent. Monthly effective rent is forecast to advance 2.8% year over year to an average of $1,909 by the fourth quarter of 2025.
5. Continued Wage Increases;
Lessening the impact of the rent increase will be a projected 2.9% annual household income growth. Supporting the income expansion will be continued hiring. Total nonfarm employment is forecast to expand on average by 123,000 jobs monthly, representing a 0.9% annual growth.
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