Apartment Supply Glut Keeps the Sunbelt Running Last in the National Rent Growth Race
With historically low vacancy rates and less supply-side pressure than other regions across the country, the Midwest multifamily market could maintain its standing on the national asking-rent-growth leaderboard longer than usual. The Midwest’s national rent growth leadership is being driven by a muted multifamily construction pipeline — especially compared with the Southeast and Southwest markets — and renewed growth due to in-migration and major new manufacturing initiatives involving semi-conductors, electric vehicle batteries, and even electric air mobility vehicles.
Is Slow & Steady Giving Way to Stronger for Longer?
The multifamily market in the Sunbelt is still feeling the heat after its rise in apartment complex groundbreakings, leaving cities like Phoenix and Charlotte with bloated inventories of four- and five-star properties. These new deliveries in the Sunbelt were almost single-handedly responsible for driving the the national average of new deliveries to a record rate in 2024. In contrast, over the past seven years, most Midwest markets maintained a new delivery rate that was below the national average.
Midwest Rent Growth Momentum is Increasing
Restrained supply in the Midwest combined with stronger demand from increased job growth is resulting in rent growth that is consistently above the national average. Ten of the 11 largest Midwest markets, led by Louisville and Cleveland, have recorded average year-over-year rent growth of 3% in 2024. This is above the national average of 1.1%, and far above Sunbelt markets whose average rent growth has plunged to negative 1%.
Midwest markets are typically in relative balance — where absorption (demand) and completions (supply) are generally aligned. This results in healthy occupancy rates and rent growth that is often countercyclical when slowdowns hit other markets like Phoenix and Charlotte. However, the demand picture in the Midwest may be undergoing a fundamental shift that could cause some Midwestern markets to rival their Sunbelt cousins across all market cycles.