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