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Multifamily Poised for Modest Growth with Miami, Orlando Leading Rent Increases

The multifamily market is expected to modestly strengthen over the next year as several economic factors converge, according to Marcus & Millichap’s 2025 multifamily investment forecast.

One factor is unemployment, which is a major driver of CRE demand. Last year, the United States added 2.2 million jobs. Marcus & Millichap expects job creation to settle at about 1.8 million this year.

“The slowing pace of job creation reflects the higher interest rate climate driven by the Federal Reserve's effort to drive down inflation,” said Marcus & Millichap national director of research and advisory services John Chang. “But we still expect the Fed to achieve a soft landing with unemployment remaining stable near 4%.”

One of the biggest headwinds to multifamily performance has been the large wave of development, he added. About 520,000 units were delivered last year, and 410,000 units are expected to come online this year, which will help support a modest tightening of vacancy in 2025 to about 5.1%, according to Chang.

“One of the forces that will help put downward pressure on vacancy is the high cost of home ownership, which, when combined with elevated interest rates, has kept the monthly mortgage payment on a single-family residence elevated,” said Chang. “This has restrained the loss of tenants to home ownership as the affordability gap – the spread between the average apartment rent and the monthly payment on a median-priced home – is near a record high.”

While this trend has supported above-average apartment lease renewal rates, the use of concessions has surged, particularly in Sun Belt metros, where new apartment construction has been concentrated.

Marcus & Millichap’s top five markets to watch in 2025 are Houston, Las Vegas, Orlando, Dallas-Fort Worth and Miami.

At fifth on the list, Houston has experienced modest inventory growth and is forecasted to have 2% job growth this year, said Chang. Vacancy should remain stable in Houston, which is expected to get a boost from anticipated pro-energy policies of the Trump administration.

Las Vegas is historically prone to over-development, but new additions have been modest recently and job creation is expected to outpace the national average, said Chang. Orlando is expected to log 4.5% rent growth this year, the strongest in the nation. Inventory growth has been high in the market, but Marcus & Millichap expects construction to ease considerably this year. That could support a 20 basis point decline in vacancy as the market adds 24,000 jobs.

Previously occupying the first-place spot on the firm’s multifamily index, Dallas-Fort Worth drops to second for 2025 as it continues to navigate a construction boom. The market added 44,000 new units last year and is expected to add 36,000 units this year, according to Chang. Expected economic growth in the market will outpace construction in the coming years.

In first place is Miami, where Marcus & Millichap expects vacancy to decline by 10 basis points in 2025 despite the addition of 8,100 new units, generating 3.6% rent growth.

“Miami and the Southeast Florida region as a whole will boast some of the strongest rent growth in the nation, supported by still strong in-migration and job creation,” said Chang.

Reprinted with permission from the Thursday, 30 January 2025 07:01:33 EST online edition of GlobeSt © 2025 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.