Tight vacancies found across the nation. Robust multifamily demand in the third quarter has pushed the national vacancy rate down 30 basis points to 4.2 percent. The national vacancy rate now stands at the lowest level in the expansion and it hasn’t been this low since 2001. A number of major metros, such as Minneapolis, Orlando and Riverside, have third quarter vacancy rates in the high-2 to low-3 percent range, reflecting the significant tightness of the multifamily markets nationwide.
Low vacancy rate rooted in mounting demand. Expanding demand for multifamily rentals can be traced to the releasing of pent-up millennial household formations, but also structural demographics changes that are raising the propensity to rent for many households. After peaking in 2016, the number of young adults living with parents declined last year. Given strong economic growth, that trend appears to have continued in 2018. As these millennials move away from home to form new households, they tend to favor multifamily renting. In addition, single-person households have experienced the most growth of any household type since 1980 and account for 27 percent of all households nationally. Singles have a high propensity to rent and account for almost 50 percent of occupied apartments today. The rise in single-person households has been a boon for apartment demand by creating a large stable occupancy base and the continued growth of these households will continue fueling future demand.