Renting has long offered flexibility and cost advantages over homeownership, especially in major urban areas. Typically, about half of apartment renters move when their leases end, drawn by the freedom to relocate easily. However, that trend has shifted significantly, with rental turnover now falling to around 30%, a sharp drop from the usual 50%. According to real estate analyst Alex Goldfarb of Piper Sandler, this unusually low turnover reflects a variety of converging factors.
The for-sale housing market has become increasingly unaffordable, and rental supply remains tight along the coasts. Economic uncertainty, higher moving costs, and a growing preference for suburban apartments—known for their larger layouts and more comfortable amenities—have all contributed to renters’ reluctance to relocate. This shift has had a notable effect on landlords’ operations. With fewer tenants leaving, property owners are experiencing improved cash flow, thanks to reduced turnover expenses such as repainting, repairs, and cleaning. In turn, they are achieving stronger pricing on lease renewals, as existing tenants are more willing to stay put.
Among the major real estate investment trusts (REITs), companies with strong West Coast portfolios, such as Essex Property Trust and Equity Residential, are benefiting from this trend. West Coast cities like San Francisco and Seattle are seeing renewed strength due to tech sector recovery and return-to-office mandates from major employers, including Amazon. Goldfarb is more cautious regarding Sunbelt-focused REITs like Camden Property Trust and Mid-America Apartment Communities. These markets, which saw strong performance during the pandemic, may face challenges if economic conditions deteriorate and lead to job losses.
The overall multifamily market is also showing signs of a rebound. Following declines driven by a surge in new supply last year, rents rose 0.9% year over year in the first quarter, supported by the highest level of net absorption since 2000—more than three times the pre-pandemic quarterly average. Demand has now outpaced new construction for four consecutive quarters, pushing the national multifamily vacancy rate down to 4.8%, below the long-term average of 5%.
This decline in vacant units marks a pivotal moment for the sector. Experts believe the improving fundamentals will lead to a surge in investment activity in 2025, as confidence returns and capital flows back into multifamily real estate.
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