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As the number of newly built apartments reaches the highest levels in 50 years, analyzing properties going through the leasing process can provide insights into the local real estate market. If it takes longer than expected for these properties to attract initial renters, they may start offering concessions to attract tenants.
To better understand and compare markets, we can look at the average monthly absorption rate per property (the number of units rented per property per month). This allows us to establish a baseline for lease-up demand and makes it easier to compare markets. For example, the total number of apartments going through the leasing process in a smaller market like Columbus will never be as high as in a larger metro area like Los Angeles. Using the per property per month measure provides a more accurate snapshot of market-adjusted demand.
Analyzing apartment data regionally, the trio of markets in South Florida—Fort Lauderdale, West Palm Beach, and Miami—continues to show strong demand, securing top positions on the demand leaderboard. West Palm Beach is third on the list with 16 units absorbed per property per month, while Fort Lauderdale is leading the pack with 20 units absorbed per property per month.
In major Texas markets like Dallas/Fort Worth, San Antonio, and Houston, luxury apartment demand is robust, except for Austin, where the average units absorbed per property seems diluted due to the sheer volume of new properties.
Notably, Baltimore, Greensboro, New York, and San Jose have experienced an increase in the pace of lease-up absorption in 2023 compared to 2022. On the other hand, Austin, Miami, Minneapolis, Newark, and Orlando have seen the pace of lease-up absorption decline by more than 50% year-over-year.
In the West region, Orange County and San Jose stand out with stronger lease-up property demand compared to their regional counterparts. Generally, West coast markets are more prevalent on the list of areas with weak absorption.
In contrast, San Francisco, Seattle, Los Angeles, and Portland show signs of regional underlying demand weakness. Sun Belt cities, however, seem to be absorbing new supply relatively well, although the rate of supply delivery is surpassing absorption.
There is already a noticeable impact on existing assets, especially in high-supply markets and neighborhoods, particularly affecting Class B properties. As more units complete the leasing process, the available stock of apartments will increase, leading to heightened competition among both existing and lease-up properties.