Newer Properties Continue To Lease Up, Resulting in Sharp Decline in Vacancy Rates
Columbus is the state capital of OH, and it is home to the state university, the Ohio State University. Columbus is also home to a number of diverse employers, including several Fortune 500 employers. This creates strong demand for rental housing in Columbus, and developers are never shy to meet the moment. For this reason, we tend to focus on cities that in Ohio that do not attract these headlines. Nevertheless, we would still love to own in Columbus given its strong fundamentals. And investing in Columbus during the tail end of its numerous development cycles may be the best way to invest in this dynamic Midwest capital city.
Multifamily vacancy in Columbus, Ohio, fell for the first time in two years, potentially putting the market on a path to stability after rising sharply since 2022. As a result, the market’s multifamily vacancy rate declined from 8% at the end of the first quarter of 2024 to just 7.6% as of early June, according to CoStar
One factor contributing to the tightening vacancy is a slowdown in completions. Around 730 units entered the market in the first quarter of 2024 — the lowest quarterly total since 2019.
Another factor is the healthy demand . The number of units newly occupied minus units newly vacated totaled 1,300 units in the first quarter. That is 10% above the first-quarter average in the five years preceding the pandemic.
The change in vacancy quarter over quarter varied among price points. While vacancy held steady among mid- and lower-priced units, it fell 80 basis points among higher-priced units in the first quarter as recent completions continued to lease up.
Though higher-priced units have the highest vacancy rate among price points in Columbus, it is just 20 basis points above the 10-year average. Meanwhile, overall market vacancy, at 7.6%, is 110 basis points above the historical average.
Similar to overall trends in the national multifamily market, elevated interest rates and the high cost of materials have weighed on construction starts. The number of units that broke ground in recent months is at the lowest level in 10 years, which is contributing to a gradual slowdown in construction activity in Columbus. This should result in a slower pace of completions, tightening vacancy rates and much healthier fundamentals over the near term.