Vacancy levels off as new multifamily construction starts decline in Raleigh-Durham

Despite a decline in average asking rents during the third quarter, operating fundamentals exhibited strength across some key metrics. Since the start of 2024, apartments in Raleigh-Durham have absorbed more than 19,400 units. From 2020 to 2023, there were roughly 19,900 net move-ins recorded. Overall, the vacancy rate has remained within a relatively tight range since the start of 2024, fluctuating between 7.5% and 8.0%. The rate improved by 30 basis points during the third quarter to 7.7%. Projects totaling approximately 9,500 units have been delivered year to date, exceeding traditional norms but lagging levels recorded in the same period of last year. The construction pipeline continues to contract following prior periods of heightened supply growth. Development activity has declined throughout much of the region, with only a few submarkets having significant totals of projects in the pipeline. South Cary/Apex has nearly 1,800 units under construction, while projects totaling more than 1,450 units are under construction in Chapel Hill.

Properties continue to change hands in the Raleigh-Durham multifamily market, but at a pace below historical norms. Year to date, sales totals are closely tracking the limited levels recorded during the same period in 2024, while per-unit pricing is down slightly. The Raleigh portion of the region has accounted for two-thirds of total transactions through the first nine months of this year, a slightly larger share of total volumes than in past years. Activity has accelerated in Northeast Raleigh, accounting for 25% of sales since the start of 2025, despite not recording a transaction during the first quarter. Last year, Northeast Raleigh, South Durham, and South Cary/Apex led the way for investment totals. Newer builds continue to trade. Properties built in the 2020s have made up 27% of sales in 2025, the greatest share of any vintage, matching trends recorded in each of the prior two years.

Looking ahead

New projects are expected to continue coming online, with roughly 12,000 units forecast for delivery in 2025. Last year, deliveries peaked as more than 13,000 units were completed in Raleigh-Durham. Development activity is anticipated to return to trend in 2026, with approximately 6,000 units slated for completion. In the near term, however, supply-side pressures will persist. After declining in recent months, the vacancy rate should trend higher during the fourth quarter. Vacancy is projected to finish 2025 at 8.0%. Asking rents are expected to decline again in the fourth quarter before trending higher at the beginning of 2026. While property fundamentals are expected to soften, demand should remain elevated. The Raleigh-Durham multifamily market will continue to benefit from job additions and robust net migration, which will sustain renter demand.

Looking ahead to the fourth quarter, sales activity in the local multifamily market is expected to accelerate. Total sales in 2025 will likely exceed levels recorded in 2024, though they will remain below traditional levels. Newly constructed assets, particularly those delivered within the past five years, should continue to account for much of the transaction volume, while properties constructed in the 1990s and 2000s should also see steady demand. Year to date, sales of 2020s-vintage assets have been concentrated on the Raleigh portion of the market, reflecting stronger recent inventory growth there compared to Durham. This imbalance may narrow in the coming quarters as construction activity slows throughout the region. Cap rates are projected to remain stable in the coming quarters, averaging between 5.25% and 5.5%.

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