Moody's: Apartment Vacancy Rate Unchanged in Q3; Office Vacancy Rate at Record High
From Moody’s Analytics Economists: Multifamily Performance Steadied, Office Stress Continued to Manifest, Retail Vacancy Declined, And Industrial Cooled Down
National multifamily vacancy stayed flat at 5.8%, the highest level on record since 2011. Supply side pressure was the main driver for the creep-up of vacancy since late 2022. However, the post-pandemic era features different demographic trends than the Great Financial Crisis. Strong household formation, steady wage growth, and the lowest homeownership rate over the past two years have collectively supported steady multifamily demand, which kept the market fundamentals in check and vacancy rates nearly unchanged from the prior quarter.
Ninety-one basis points higher than its 10-year average between 2010 and 2019, the current vacancy level continued to pressure multifamily rent growth. Closing the third quarter at $1,845/unit, the national average asking rent remained $5 lower than its year-ago level. Despite marginal growth over the past two quarters, the losses incurred at the beginning of the 12-month cycle still need some time to recover as demand catches up with frictional oversupply. …
emphasis added
Moody’s Analytics (Reis) reported that the apartment vacancy rate was at 5.8% in Q3 2024, unchanged from an upwardly revised 5.8% in Q2, 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 down slightly 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 office sector held steady in Q3 2024 with a vacancy rate stable of 20.1% after three consecutive record-breaking quarters. The vacancy rate has slowly but steadily moved from 16.8% in Q4 2019 to 20.1% in Q3 2024 as demand weakened as a result of widespread WFH policies. While the flat vacancy rate in Q3 offers a quarter of decent news, it’s likely we’ll continue to see upward trends for the vacancy rate moving forward.
With over 4.4 billion square feet of inventory in the sector, the upward drift of the vacancy rate has previously experienced quarters of vacancy stagnation since the pandemic. While expectations of a continued vacancy rate climb remain, quarters of adjustment are likely to occur. For example, we previously observed vacancy rates briefly drop and hold steady in 2021 when concessions were at their peak. Following four consecutive quarters of vacancy increases, passing a historic peak of 19.3% in Q4 2023, Q3 2024’s flat vacancy trend likely reflects an adjustment period in the market.
Moody’s Analytics reported that the office vacancy rate was at 20.1% in Q3 2024, up from 19.2% in Q3 2023. This ties the record high in Q2 and is above the 19.3% peak during the S&L crisis.
Apartment and Office vacancy data courtesy of Moody's Analytics.