Columbus Moves Toward Market Stability
Columbus, Ohio, is a thriving economic hub, home to Ohio State University, several Fortune 500 companies, and a diverse employment base. This strong economic foundation has consistently driven demand for rental housing, and developers have historically been quick to respond with new supply. However, Columbus is now experiencing a shift as new apartment deliveries slow and market fundamentals strengthen.
For this reason, we tend to focus on cities 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.
As of Q2 2024, multifamily vacancy in Columbus fell for the first time in two years, dropping from 8% at the end of Q1 to 7.6% in early June, according to CoStar data. This decline suggests that Columbus may be entering a more stable phase following a period of elevated vacancy rates.
Declining Supply Eases Vacancy Pressures
A sharp slowdown in apartment completions has been a key factor behind the tightening vacancy rate:
- Only 730 new units entered the Columbus market in Q1 2024, marking the lowest quarterly total since 2019.
- In contrast, Columbus has historically seen higher development volumes, which contributed to rising vacancies over the past two years.
- With fewer completions, existing units are absorbing demand more efficiently, helping to rebalance supply and demand dynamics.
Strong Leasing Activity Supporting Market Recovery
Alongside slower supply growth, Columbus is seeing healthy rental demand, reinforcing market stability:
- Net absorption (newly occupied units minus newly vacated units) reached 1,300 units in Q1 2024.
- This absorption rate is 10% higher than the first-quarter average in the five years preceding the pandemic.
- Demand remains especially strong among high-end properties, where vacancy rates fell by 80 basis points in Q1.
While higher-priced apartments still have the highest vacancy rates, they are now just 20 basis points above the 10-year market average, signaling a return to balance in this segment. Meanwhile, overall market vacancy, at 7.6%, is 110 basis points above the historical average.
The Impact of Rising Interest Rates on Development
Similar to national trends, higher interest rates and rising material costs are weighing on new development activity in Columbus. As a result:
- The number of units breaking ground in Columbus is now at its lowest level in a decade.
- Developers are scaling back projects, leading to a gradual slowdown in construction activity.
- This slowdown is expected to tighten vacancy rates further and support healthier rent growth in the near term.
A Stronger Market Outlook for Columbus
With new apartment completions slowing and demand remaining robust, Columbus appears poised for a stronger, more balanced multifamily market. As vacancy rates decline and construction activity slows, investors can expect more sustainable rent growth and stabilized fundamentals in the coming quarters.
For those considering long-term investments in Columbus, the current market dynamics suggest an opportune time to enter, particularly as the market transitions toward a more favorable supply- demand balance.