As new supply begins to slow down from a 40-year high last year, rent growth has begun to creep upward across the nation. But some markets continue to outperform the national average, with rent growth double or even triple the national average of 1.3 percent, according to CoStar data.
Continuing the regional trends seen in 2023, the Midwest is driving rent growth, but the Northeast has been quickly catching up. Bucking the regional trends, two Western markets have also joined the ranks of rent growth leaders.
Let’s take a closer look at the top 12 major markets reaping the greatest benefits of stable supply with growing demand, based on Q2 estimates in early June.
1. Louisville, KY
The rent growth leader for March, this Midwestern market continues to lead the nation for rent growth into the second quarter. The Louisville market, which borders the Midwest and Sun Belt regions, extends to surrounding counties in Kentucky and includes parts of Southern Indiana. The growth in asking rents is far outpacing the national average. This market has seen asking rents grow by 5.4 percent — over triple the national average of 1.3 percent.
What’s behind Louisville’s ascent to the top of the rent growth charts? Derby City has maintained a healthy balance of supply and demand. New construction has been concentrated in Southern Indiana, where demand has been the highest, thanks to the booming population. With a vacancy rate of 7.2 percent, the Louisville market remains below the national vacancy rate of 7.9 percent. Even as deliveries are set to rise in 2024, absorption has kept up. Stabilizing demand, the Louisville area is home to several universities and has seen recent investment from major employers.
2. Richmond, VA
Asking rents in the Richmond multifamily market have grown 3.9 percent year over year. Despite a relatively high vacancy rate of 8.3 percent, this market has retained above-average rent growth.
This seemingly contradictory dynamic is due to the steady stream of new supply, met by high renter demand. Relatively low rents have attracted new residents and spurred development in the Virginia capital. The market has seen a growing population of transplants from Northern Virginia, the District of Columbia, and other major metropolitan areas.
3. Cleveland, OH
Following a strong performance in 2023, Cleveland continues to rank among the top markets for rent growth, with 3.8 percent rent growth projected for the second quarter of 2024. The second biggest population hub in Ohio, Cleveland has successfully weathered the challenging multifamily market post-pandemic, thanks to its affordability and limited new construction.
The Rock and Roll Capital of the World ranked fourth for lowest rent per square foot in a 2023 analysis, and its current asking rents still remain relatively low in absolute terms, at an average of $1.39.
Although its addition of 2,400 units in 2023 marked a record year for new supply in Cleveland, this increase is modest when compared to the national average and the skyrocketing construction in the Sun Belt. The construction pipeline is set to slow, suggesting that multifamily owners and operators in the Cleveland area will continue to enjoy growth in asking rent into 2024 and 2025.
4. Washington, D.C.
Rent growth in the nation’s capital has on the rise, hitting 3.8 percent in the second quarter.
Also known as the DMV, the metropolitan area around Washington, D.C. has enjoyed strong population growth that has outpaced its modest construction pipeline, driving up asking rents. Reversing three years of flat or negative growth, the population of the Greater Washington area grew by 39,000 people last year, and at 7.0 percent, the vacancy rate in this market remains below the national average.
5. Kansas City, MO
Among the top markets for rent growth in 2023, Missouri’s Kansas City market has continued to maintain strong rent growth into 2024, with a projected rent growth rate of 3.8 percent for the second quarter. This Midwestern market enjoys a tight labor market and a high employment rate, factors that have kept renter demand relatively high.
Even as the KC metro has seen a rise in new supply, it remains at a lower risk of oversupply than most markets. The share of units under construction in the Kansas City market remains low compared to the national average, comprising only 3.9 percent in the first quarter of 2024.
6. San Jose, CA
One of only two West Coast markets to make this list, California’s San Jose multifamily market has been buoyed by a healthy supply/demand dynamic. Silicon Valley’s high-paying tech economy has sustained strong demand and high asking rents, with rents growing 3.6 percent year over year, as of the second quarter. This continues this year’s positive trendline for rent growth in San Jose.
With an expensive house market and large affordability gap between buying and renting, San Jose is expected to maintain solid renter demand for the foreseeable future. At 5.2 percent, vacancy remains below the national average.
7. Columbus, OH
The capital of Ohio, Columbus has seen asking rents grow by 3.3 percent year over year. This relatively affordable big city came in ninth in a ranking of lowest rents per square foot for 2023.
Although construction in the Columbus market has been modest, new supply in the Columbus market is set to shrink, indicating that the favorable supply/demand dynamics for apartment owners and operators will continue in the months and years ahead.
Deliveries are expected to drop 36 percent from 2023 to 2024, and new supply is forecast to continue drop in 2025. At the same time, the market’s growing population and relatively low rents are likely to sustain renter demand. These factors indicate that Columbus’s position as a rent growth leader is likely to continue.
8. Boston, MA
The cultural and financial center of the Northeast, Boston ranks eighth for rent growth as of the second quarter. With asking rents growing by 3.3 percent year over year, the Boston metropolitan area has both one of the highest rates of rent growth and some of the nation’s highest rents per square foot.
The area has seen relatively modest development, with units under construction making up only 5.5 percent of total inventory, and new supply is forecast to moderate further.
9. Indianapolis, IN
One of the Midwestern multifamily markets that has thrived in the post-pandemic period, Indianapolis has consistently sustained above-average rent growth. Currently estimated at 3.1 percent for the second quarter, rent growth in the Indiana capital and surrounding suburbs has been buoyed by solid demand and relatively low construction relative to inventory. In the first quarter of the year, units under construction made up only 4.1 percent of the total multifamily inventory.
What’s behind the strong demand and positive outlook for this Midwestern multifamily market? Indianapolis boasts a diversified economy, relatively affordable rent compared to other U.S. cities, and a central location. Known as the “Crossroads of America,” the Indianapolis metropolitan area is a one-day drive to 80 percent of the U.S. population and is well connected by interstate highways in all directions.
10. Seattle, WA
The second of two West Coast markets on this list, Seattle’s emergence as a rent growth leader is a new development. As recently as the third quarter of 2023, multifamily owners and operators in the Washington metropolitan area were struggling with declining rents. The third quarter saw negative rent growth of 0.3 percent, following a quarter of negative 0.8 percent. As of January this year, the Seattle metro showed only mediocre growth. Now, in the second quarter of 2024, Seattle’s rent growth has skyrocketed up to 2.9 percent.
A growing population and strong job market have driven this turnaround, pushing up renter demand. Seattle added about 12,000 new residents in 2023, and growing return-to-work requirements have seen demand grow in areas close to business districts and transit lines. Known for a booming tech industry, the Seattle metropolitan area is home to the headquarters of major employers Amazon and Microsoft.
Even as new multifamily supply in Seattle remains 40 percent above the market’s average from a decade ago, the pace of new construction is slowing, hindered by financing challenges and rising interest rates.
Like many coastal markets, Seattle commands high rents and is one of the top markets for highest rents for square foot, coming in 10th in 2023.
11. Northern New Jersey, NJ
The multifamily market of Northern New Jersey has shown high rent growth throughout 2023 and 2024. Strong demand has driven up asking rents by 2.8 percent in this Northeastern market, which stretches from Newark up to the northern edge of the state and down to Hunterdon and Somerset counties.
Even as Northern New Jersey’s growing population has helped boost rent growth, new supply is on the way, indicating that this trend may slow down as new deliveries come online. Northern New Jersey is among the top 20 markets with the greatest construction pipelines.
12. Cincinnati, OH
Asking rents in this major Ohio metro have risen by 2.8 percent compared to this time last year. Cincinnati joins two other Ohio markets in the top 12.
With units under construction making up just over 3 percent of total inventory, the Cincinnati market offers a healthy balance of supply and demand. This ratio reflects a lower-than-average ratio compared to the U.S. as a whole and is dramatically lower than the construction pipelines in the oversupplied Sun Belt. Even so, 2023 marked a record year for deliveries in Cincinnati, and vacancies have crept up to 7.1 percent, slightly below the national average of 7.9 percent.
Cincinnati’s rent growth prospects look promising, with supply set to shrink in 2024 and 2025. On the demand side, Cincinnati’s relatively low cost of living and growing population offer a strong basis for rising demand.
Looking for more multifamily insights?
Explore rent growth trends across the country. CoStar’s Jay Lybik breaks down what’s happening at the national, region, and market level. Watch now:
And don’t forget to check out the latest state of the market webinar, where Jay Lybik offers a mid-year check-in on rent growth, supply, vacancies, and more — available now on demand.
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