Moody's: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High

From Moody’s Analytics Economists: Multifamily Continued to Defy the Supply Shock, Office’s Vacancy Rate Broke Another Record, Retail Rents Drift Higher with Tight Supply, And Industrial Maintains Status Quo

The national multifamily market delivered a balanced performance in the second half of the year. Nearly 290,000 units were verified to complete across the 79 major metros for the year, with final completion expected to surpass the 300,000 mark as survey goes through the remainder projects in the next few weeks. Accounting for all 275 US metros, about 15% more units will be counted towards the total inventory growth in the nation. Amid record-level inventory growth, average vacancy rate edged up 10 bps in each of the last two quarters and finished 2024 at 6.1%, 40 bps higher than the same time last year and the highest level on record since 2011. …

Strong rental demand and competitive new Class A multifamily completion have secured positive rent growth in the last three quarters. National asking rent ($1,850) registered another 0.2% growth in Q4 and nearly touched its all-time high at $1,851 recorded in Q3 2023. However, elevated vacancy rate led to longer lease-up time which encouraged concession. Effective rent growth slowed from 0.5% earlier this year to just 0.1% in Q4. At $1,757 in Q4, the national average effective rent remained $12 below its peak level.…

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Moody’s Analytics (formerly Reis) reported that the apartment vacancy rate was at 6.1% in Q4 2024, up from an upwardly revised 6.0% in Q3, and up from the pandemic peak of 5.6% in Q1 2021. This is the highest vacancy rate since 2011. Note that asking rents are flat year-over-year.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Moody’s Analytics is just for large cities.

Office Vacancy Rate Unchanged at Record High

From Moody’s:

The national office vacancy rate hit a new record at 20.4% in Q4 2024, with average effective rents increasing by merely 0.1%. Over the course of 2024, the office sector has suffered a total of 80 bps of vacancy increase, with 30 bps registered in the final quarter. Five years since the adoption of the widespread hybrid and remote working models, a new regime is forming which has led to a permanent reduction in office demand. More flexible or shorter office leases meant pre-pandemic rollover has now fused with early-pandemic lease rollover throughout 2024, driving more volatilities in future office performance.

Moody’s Analytics reported that the office vacancy rate was at 20.4% in Q4 2024, up from 20.1% in Q3 2024. This is the highest vacancy rate on record and is above the 19.3% peak during the S&L crisis.

Apartment and Office vacancy data courtesy of Moody's Analytics.