Why Apartment Rents Could Surge Sooner Than Expected

I’ve been pounding the table about the upcoming apartment supply shortage (and why now is the time to be buying) for some time, and more and more evidence supporting that thesis keeps coming out.

And recent research from commercial real estate brokerage Marcus & Millichap suggests this supply shortage could hit sooner than anticipated.

 

Record Supply Meets Unexpected Demand

The apartment market has seen massive supply growth in 2024, particularly in Q3. To put this in perspective: more new units came online in Q3 alone than in most entire years over the last two and a half decades:

This flood of new units explains the tepid rent growth most markets have experienced this year. And given the multi-year timeline for apartment construction, this supply wave was predictable.

But what wasn't predictable? The extraordinary demand for these units.

 

Absorption Outpacing Supply

Even with record levels of new inventory, demand (measured by absorption) exceeded supply in both Q2 and Q3:

In other words: units are being leased as fast as they're being built.

This robust demand is reflected in vacancy rates, which decreased by 20 basis points (0.2%) in Q3, returning to levels seen a year ago:

 

Market-Specific Opportunities

The decline in vacancy is particularly notable in markets with limited new construction:

 

Side note: Las Vegas, one of Big Spring Capital's target markets, stands out here.

With minimal new construction and vacancy dropping 100+ basis points year-over-year, Las Vegas exemplifies our investment thesis: markets with constrained supply are positioned for substantial rent growth as demand outpaces new inventory.

This declining vacancy trend provides early validation of our strategy.

 

And the outlook suggests further vacancy declines as the current construction pipeline clears:

 

New Construction Starts (or a Lack Thereof)

That pipeline shows no signs of replenishing.

Rental housing economist Jay Parsons had a great thread on Twitter X this week, showing that multiple leading indicators continue pointing to a massive drop-off in new apartment supply:

 

Does Rent Growth Hit Sooner Than Anticipated?

It’s clear that we’re headed towards a supply crunch in multifamily, which will put significant upward pressure on rents.

But the question on everyone’s mind is: when will this rent growth kick in?

While most industry experts have targeted 2026, with some suggesting late 2025, the above data points to a potentially accelerated timeline. Given the combination of:

  • Stronger-than-expected absorption

  • A rapidly diminishing construction pipeline

  • Declining vacancies in supply-constrained markets

We could see meaningful rent growth emerge in the next 6-9 months.

 

Bottom Line

The multifamily market is presenting a compelling opportunity. Record absorption even amid massive supply delivery tells us demand remains robust. More importantly, the construction pipeline is drying up with no signs of replenishing anytime soon.

The window to acquire properties at today's prices won't stay open forever, which is why we're in full-on acquisition mode at Big Spring Capital. It could be a decade or more before we see another opportunity like this – and we don't want our investors to miss out.

Now is the time to be investing in rental real estate. The data is clear, and the opportunity is here.

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