Looking Forward

Over the past few weeks, the 2023 multifamily outlook has shifted from projections of doom and gloom to projections that are more consistent with historical averages. To go with this overwhelming change in sentiments, CoStar recently released their 2023 forecasts which were built on data from Q4 2022.

Rent Growth

CoStar compiled their 2023 projections for rent growth using historic averages as well as anecdotal data for each of the above markets. When looking at the graphic above, there are a few items to highlight.

  1. The steady-eddy Midwest is expected to sustain modest growth through 2023 as the amount of deliveries is for the most part, consistent with what the demand is calling for. Cincinnati comes in nearing the top at 4% expected YoY rent growth in 2023. Not trailing far behind is Columbus. These two cities have sound fundamentals that are coupled with healthy new deliveries that align with demand and ultimately drive moderate growth in Central and Southwest Ohio.
  2. Some of the Sunbelt markets will continue to grow at rates more modest than those of the Midwest due to higher growth in years preceding.
  3. Some of the Sunbelt markets will struggle. This is due in large part to the sheer amount of deliveries coming in 2023. Some of these markets have record levels of new deliveries that are coming online at a time when demand has naturally slowed due to the economic uncertainty in our country.

While this rent growth will play a significant role in how deals are traded in the coming year, it is not the only important metric to focus on. While we will still expect to see moderate growth that is more in line with historical averages, occupancy will be making a significant impact as well and it can not be ignored.


Occupancy metrics are important in analyzing multifamily investment properties because they give insight into the property’s ability to generate rental income. High occupancy rates suggest a strong demand for rental units, which can lead to higher rental income and increased property value. On the other hand, low occupancy rates may indicate a weak demand, which could result in lower rental income and decreased property value. Factors that influence occupancy rates include location, local economic conditions, and property condition.

Looking at the above graph it is important to note that this is the national forecast. In order to get a better idea of how each market is performing, you need to dig in on a local level. Some markets are seeing record high new deliveries which are driving lower rent growth and higher vacancy. For example, Austin, TX is expecting 19,000 new units which is a record for that market. This directly aligns with the expected growth which is hovering right around 0%.

Class Performance

This shear number of new units coming online will have a direct impact on Class A as the existing assets will have to compete with new deliveries. What does this mean for Class A? It means that vacancy may be driven higher due to competition. In addition to this, renters may begin looking to lower their monthly spending and seek Class B assets that have around a 25-30% delta on asking rents.

Class B sits in perhaps the best position between the three classes as they will benefit from renters seeking shelter from Class A pricing.

Class C has its own set of challenges. As inflation continues to soar, Class C renters are having a harder time making ends meet. This results in heightened delinquency for Class C properties. They are seeing around 90-91% collections when compared to scheduled charges. Well below the 95% average seen amongst Classes A and B.

Key Takeaway

In conclusion, our strategy is to continue focusing on Class B properties in the slow & steady growth markets of the Midwest. These will provide some insulation to some of the unknowns coming in the near future. Whether it be a soft or hard landing, we love the position that Midwest real estate is in relative to the macro environment.

As always, we hope this is insightful. If you’re interested in learning how to invest or discussing some of our current investment opportunities, don’t hesitate to reach out!

Mitch and Kevin

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