US Multifamily Forecast Retains Record-Low Vacancy for 2022

Double-Digit Rent Growth Projected To Moderate as Rates Move Toward New Norm

Unprecedented demand for apartments combined with the vacancy rate hitting a historical low created record-breaking rent growth for U.S. multifamily properties in 2021. These and other positive demand drivers are expected to continue at strong levels into 2022, allowing the vacancy rate forecast to hold at the current record low of 4.5% throughout the year.

Absorption, or the net change in units that become occupied during the year less move-outs, is expected to decline from the record pace set last year, but not due to weakness in the sector. Rather, the current tight vacancy conditions are acting to moderate demand.  We are  expecting absorption to hit 372,000 apartment units in 2022, which is 20% higher than the five-year average before the pandemic.

With demand still outpacing supply nationally, multifamily rent growth appears poised to again outperform in 2022 at an average rate of 7%. This would be the second-highest annual rent growth figure on record behind the 11% national average posted in 2021. At that level, the rent growth witnessed in 2021 was unsustainable over the long term, so the moderation expected in the 2022 rent forecast should not be viewed as a sign of weakness but rather a return to some sense of market normalcy.

Multifamily rent forecasts for individual markets in 2022 aren’t expected to match the unprecedented totals posted last year except in four locations. However, market rent forecasts are still well above their respective historical averages.

Sun Belt markets dominate the top rent growth forecasts for 2022, although San Francisco and San Jose, California, both are near the top of the pack as rebounding demand is expected to push rent growth in the Bay Area beyond the 2021 totals. Two other standout California markets, the Inland Empire and Orange County, are keeping the solid rent growth of 2021 going strong into the new year.

Overall, the multifamily picture for 2022 looks solid as all major U.S. markets see 2022 rent growth forecasts well above their respective historical averages.