Columbus Ohio Multifamily Market Analysis Q2 2024
Analysing Q2 2024 data from Costar, we observe promising signs of stabilization amid evolving market dynamics. Despite high borrowing costs and a slowdown in new construction, vacancy rates have tightened, and demand has outpaced supply for the first time in two years.
Vacancy Rates:
- Columbus vacancy rate in 24Q1: 8.1% (slightly ahead of the national benchmark).
- Sharpest contraction in 4 & 5 Star properties: 10.6% vacancy, below mid-2022 peak.
- 3 Star properties vacancy: 7.6%, highest level in nearly two decades.
Demand and Absorption:
- Demand outpaced supply for the first time in two years.
- Southern Columbus (e.g., Groveport, Canal Winchester): Captured 20% of annual net absorption.
- Northeast Columbus (e.g., New Albany area): Represented another 20% of annual demand.
Rent Growth:
- Rent growth in 24Q1: 3.2%, among the top markets in the country.
- Rent growth is weakest in 4 & 5 Star properties due to high deliveries.
- Accelerated rent growth in 3 Star and 1 & 2 Star properties amid less new supply.
Construction and Development:
- New supply in 2024: Projected to shrink by 36% year over year.
- Expected further slowdown in 2025: Potential 24% reduction.
Market Stability:
- Vacancy tightened, and rent growth accelerated, indicating market stabilization.
- Factors supporting tightening market conditions: Affordability, healthy population growth, and a slowing construction pipeline.
Transaction Activity:
- Sales volume in 24Q1: $103 million.
- 40% below pre-pandemic average first-quarter volume.
Deal Sizes:
- Typical deals: $40-$70 million over the past decade.
- Recent transactions over $40 million: Only three in the past 12 months (80% decrease).
- Most top sales: $10-$30 million range.
Buyer Profiles:
- Institutional buyers: 20% of total volume over the past five years.
- Private buyers (developers): Over two-thirds of volume.
- Recent trend: Increased activity from private equity funds, accounting for over a quarter of deal volume in the past year.
Significant Transactions:
- Camden Apartments, New Albany: Sold for $49.5 million, 95% occupied, 5% cap rate, $258,000/unit.
- Realty Mogul’s acquisition in Discovery District: 84-unit building, $19.6 million, $233,300/unit, 10% below similar properties’ values from early 2022.
Market Trends:
- Recent transactions: Half involved 2 & 3 Star properties, fewer than 40 units, $1-$3 million range.
- Example: Sandridge Apartments (28 units) purchased for $2.1 million, 80% occupied, 5.7% cap rate, 50 basis points above previous comparable trades.
Outlook:
- High interest rates and slowing rent growth will likely keep transaction activity muted.
- Institutional investors may hold off on deploying capital.
- Opportunity for private investors to acquire discounted assets.
Source: Costar Group
