Construction Slowing in St. Louis After Three Years of Elevated Multifamily Deliveries

The pace of multifamily deliveries has continued to slow since peaking in 2022, gradually easing supply-side pressures. The vacancy rate in St. Louis has remained steady in the low-6% range during much of the past year, following the last notable jump in vacancy in early 2024. Although new inventory has grown by more than 11,000 units since early 2022, only about 2,500 have come online in the past year. The St. Charles County submarket highlights notable shifts in vacancy amid a slowdown in new deliveries. Over the past five years, this submarket accounted for roughly 40% of all multifamily construction in St. Louis. Before this wave of new supply, vacancy in St. Charles County was below 3%, before peaking at 5.6%. The current vacancy rate in the submarket is 4.2%, down 120 basis points over the past year, with only one project coming online during this period.

Sales activity in the St. Louis multifamily market declined in recent months following a strong fourth quarter, when total volume reached its highest point since the second quarter of 2022. Still, transaction levels in the first quarter closely tracked those recorded at the start of each of the past two years.  After falling in 2024, pricing has rebounded. In transactions where pricing was available, the median price so far in 2025 is $204,800 per unit, nearly double the median recorded last year. Part of the spike is attributed to sales of Class A assets, pulling the pricing of closed deals higher. Class A properties have accounted for 25% of all sales year-to-date, compared to a five-year average of just 10%. Among these deals, the median price for Class A properties stands at $211,600 per unit, while lower-tier units have traded at $87,300 per unit.

Looking ahead

Operating conditions in the St. Louis multifamily market are projected to remain relatively steady in the coming quarters, with rents rising modestly and vacancy rates only inching higher. Rent growth is expected to continue but at a slower rate than last year, reflecting a more balanced market environment. The pace of multifamily deliveries is projected to pick up slightly in the near term, but the number of units delivering in 2025 will mark the lowest total since 2021. The elevated delivery activity from prior years has prevented vacancy rates from improving despite steady demand. Absorption is expected to closely track new deliveries through the remainder of this year, limiting further vacancy increases. Looking ahead, fewer projects in the pipeline could result in lower vacancies, eventually supporting stronger rent growth after this year’s more modest gains.

Investment activity in the St. Louis multifamily market has remained steady, supported by easing supply pressures and stable vacancy rates. This stability is setting the stage for continued strong transaction volume through the remainder of 2025. Transaction volume is expected to closely track last year’s levels, which aligned with traditional norms. Improving rents and declining deliveries are poised to stabilize market fundamentals, revealing viable investment opportunities and further boosting demand. The share of Class A properties trading this year is likely to remain elevated compared to recent averages, while Class B sales may record the biggest increase in activity in the coming months after modest first-quarter results. Cap rates have been stable for more than a year and are expected to remain within a tight range of current levels, consistent with recent trends.

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