CoStar Report Highlights Detroit, Kansas City & Cleveland
Recent data from CoStar highlights a key trend: while Sunbelt markets cool under the weight of oversupply, several Midwest markets are quietly outperforming. Modest construction pipelines combined with steady rental demand are fueling nation-leading rent growth in cities like Detroit, Kansas City, and Cleveland.
For those of us who have navigated multiple real estate cycles in the Midwest, this comes as no surprise. The fundamentals in our home markets remain consistent. They continue to “chug along,” offering slow but steady growth—even as former hot spots experience turbulence.
Rent Growth Trends: National Slowdown vs. Midwest Momentum
Since Q1 2022, national rent growth has slowed dramatically—from 9.9% down to just 1.0% in Q4 2024. Much of this weakness stems from oversupply in Sunbelt markets, where aggressive development outpaced organic demand.
In contrast, “steady eddy” Midwest markets like Detroit, Kansas City, and Cleveland have demonstrated resilience—just as they did following the 2009–2010 downturn. Limited new construction combined with steady demand is driving strong occupancy and rent growth well above national averages.
Detroit: Leading the Nation
Detroit emerged as the top-performing rental market in 2024:
- Rent Growth: 3.3% year-over-year—nearly triple 2023’s rate
- Vacancy Rate: Dropped from nearly 8% to just under 7%
- Affordability: Average rent of $1,320, still 23% below the national average
Above-average demand pushed Detroit’s absorption levels to a three-year high. As a result, CoStar projects rent growth could eclipse 5% by the second half of 2025, further tightening the market.
Kansas City: Gaining Strength
Kansas City’s multifamily sector also posted solid improvements in 2024:
- Vacancy Rate: Dropped 90 basis points to 7.9%
- New Construction: Began to slow, reducing future supply pressures
Demand outpaced supply as new completions tapered off, setting the stage for stronger rent performance in 2025.
Cleveland: Momentum Rebuilding
Cleveland’s market made a strong comeback in 2024:
- Rent Growth: 3.1% in Q4 2024—80 bps ahead of the pre-pandemic average and three times the national average
- Absorption: Reached 1,600 units, the highest in three years
- Completions: Fell by nearly 30% year-over-year, slowing new supply
Although completions will briefly rise in 2025 due to projects initiated earlier, few units have broken ground in the last nine months. CoStar forecasts tightening vacancies and accelerating rent growth over the next 12–18 months as supply pressures ease.
Columbus: Demand Surging Ahead of Supply
Columbus closed 2024 on a strong note:
- Annual Rent Growth: 2.8%.
- Apartment Demand: Nearly 6,000 units absorbed—double the average in the five years preceding the pandemic.
- Completions: Dropped by 33% year-over-year.
For the first time since 2021, demand outpaced new supply, lowering vacancy rates by 25 bps year over year and supporting steady rent growth. Tightening conditions are expected to accelerate rent growth again through 2025 as construction activity remains subdued.
Final Takeaway
While Sunbelt markets grab headlines, steady, resilient markets like Detroit, Kansas City, Cleveland, and Columbus are quietly delivering real, risk-adjusted performance. Midwest affordability, controlled supply pipelines, and durable demand fundamentals continue to offer compelling opportunities for investors willing to look beyond the obvious.
These trends aren’t new to us—they’re part of our long-term playbook.
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