What to do about multifamily vacancy rate increasing

Question

The multifamily vacancy rate is up to 6.3% nationally. This is still low but the increase worries me. I'd like to hear from the experts on this forum about why they think that the rate is going up and what it's affect will be on their business/investments. Please let us know what you are doing right now.

Chris Seveney · Answer

@Benjamin Aaker

Supply and demand. Rents have shot up quickly and there is a significant amount of multifamily being built right now (I believe more than ever).

When pushing rents to the max it will increase vacancy as larger buildings having vacancy is not a bad thing. It’s used to test the market and cost.

We are also at near all time lows so it going back up to 7-8% vacancy rates would not be shocking

Jill F. · Answer

I am concerned but not  panicking. We try to have the nicest rentals at each price point where we compete and usually there is nothing that compares to our rentals in a given neighborhood.  So far what I am seeing is less of a line.

The last one-bedroom apartment I marketed in a "C+" neighborhood that is on the edge of a worse neighborhood, rented to a second well qualified tenant with less than 2 weeks total vacancy after the first qualified tenant backed out due to family reasons. Last year I would have had to tell three or four other qualified applicants that the apartment went to an earlier qualified applicant. It's been a while since I marketed a two bedroom.

Because over half of our units are one bedrooms we rent to a lot of brand new household first time renters.

Most of the new stuff being built here, is super high end and expensive so we aren't really competing with them.

Nathan Faselt · Answer

I appreciate the valuable insights shared by everyone in this thread. Building upon @Scott Mac last point, I'd like to further emphasize with remote work opportunities still being understood. With , individuals now have the flexibility to explore and live in foreign countries where their dollars can stretch significantly.

For instance, places like Brazil and Colombia offer a lower cost of living while still providing a high quality of life. I personally know individuals who have taken advantage of this trend and found themselves living quite comfortably abroad

Additionally, the gig economy has given rise to a new breed of "digital nomads" who seamlessly transition between temporary housing, house-sitting, and even camper/van lifestyles. This  allows them to maintain a fulfilling lifestyle while keeping their expenses manageable.

While these specific examples may not have a significant impact on statistical trends, they highlight the evolving nature of work and lifestyle choices. which I believe could be effecting traditional housing.

Mike Dymski · Answer

Household formation expanded rapidly during the period of massive government stimulus and it's contracting during the subsequent period of high inflation.

Scott Mac · Answer

It is wise to look at class, city and neighborhood within the city, as well as age of construction.

For instance is it a lot of new construction units on newly built bike route/light rail in (fictional) Shark Beach, while the class C down by the docks are running normally?

Also is it one huge operator struggling vs many smaller owners.

Also, is it under 20 units, 20 to 100's or over 100's making the bulk of the vacancies.

And are people leaving the area for a (perceived) better life elsewhere.

Just my 2 cents.

What to do about multifamily vacancy rate increasing

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