April 18, 2023

Midwest Q4 Multifamily Market Insights: Expected to outperform

Highlights:

The multifamily markets across the Midwest performed well throughout 2022 and are positioned for continued health in the year ahead. Vacancy rates are low, and rents are trending higher. The pace of construction is accelerating, but deliveries should closely track renter demand growth.
Vacancy in the Midwest rose 10 basis points from the third quarter to the fourth quarter, reaching 4.5 percent. Despite the modest uptick late in the year, the rate posted an annual decline of 30 basis points in 2022.
Rents across the region spiked by 8.4 percent in 2022, and most markets continued to post quarterly increases through the end of the year. Looking ahead, most Midwest markets are forecast to record rent increases between 3 percent and 4 percent in 2023.
Regional investment activity slowed modestly in the fourth quarter, and most markets recorded fewer property sales in 2022 than in 2021. Prices inched higher, in part due to Class A properties accounting for a greater share of overall activity. Cap rates rose by about 75 basis points in 2022.