Shafiq Hirani explains why apartment vacancy headlines mislead owners of established buildings. New luxury properties absorbed 68% of national demand in Q2 with heavy concessions like two months free rent, pulling tenants from older buildings. Stabilized vacancy rose 34 basis points year-over-year across major U.S. regions despite overall vacancy falling.
CoStar reported that US apartments absorbed 163,739 units in the second quarter, comfortably outpacing the 118,047 units delivered. Overall vacancy fell 26 basis points from the prior quarter to 8.15%. CBRE reported net absorption of 167,500 units, nearly double the first quarter, With vacancy down 50 basis points to 4.3%. New deliveries fell 14% year over year. Their head of multifamily capital markets said the supply wave is cresting and multifamily is positioned for its strongest rent recovery since 2022. You may notice those vacancy numbers are very different, 8.15% versus 4.3%. That is because the 2 firms track different property samples. What matters is that both point the same direction: demand is strong and supply is slowing. But here is the number that actually matters for you, and it is the one that explains why your leasing feels harder than the headlines suggest. CoStar breaks vacancy into 2 categories. Overall vacancy includes properties still in lease-up, meaning brand new buildings that are filling up for the first time. Stabilized vacancy excludes those and measures only established properties— buildings like yours. Overall vacancy fell 14 basis points year over year, but stabilized vacancy rose 34 basis points. Those 2 numbers are moving in opposite directions. And this is the critical part: stabilized vacancy increased year over year in every major U.S. region— Northeast, Pacific, South, Mountain, Everyone. Even in regions where overall vacancy improved. Read that again. The market looks like it is recovering because new buildings are leasing up. Established buildings are seeing vacancy go up, not down. The reason is straightforward. New properties are winning the renters. 4- and 5-star properties, the newest luxury inventory, accounted for more than 111,000 units of second-quarter absorption. That is nearly 68% of all national absorption going into the newest, most expensive buildings. Those buildings are offering concessions— 2 months free, waived fees.
When a renter can get a brand new unit with a month or 2 free, that pulls demand away from established buildings, including yours. Austin is the clearest example. Vacancy across 4- and 5-star properties there fell 398 basis points year over year, but stabilized vacancy in Austin rose. The new buildings filled up by taking tenants from somewhere, and that somewhere was existing properties.
