Columbus Ohio Multifamily Market Report Q2 2023

The multifamily housing market in Columbus has shown both strength and signs of deceleration in recent months. With robust sales exceeding the pre-pandemic average, the market has witnessed significant investor activity, including notable deals involving out-of-state buyers. However, there are indications of a slowdown, potentially influenced by high-interest rates impacting buyer and seller expectations. On the demand side, the market has faced challenges with slower growth and increased vacancy rates, particularly in the 4 & 5 star sectors. Despite these fluctuations, Columbus remains an attractive market due to population growth, significant investments, and potential development opportunities.

• Based on Costar Data Export as of Q2 2023, the Columbus market cap rate average is 6.6%, with a lowest of 5.4% and a highest of 8.4%. The lowest cap rate was registered in Downtown Columbus, while the highest was in Madison County, west of Columbus.
• Multifamily sales in Columbus have reached $1.8 billion in the past 12 months, more than double the average in the three years before the pandemic.
• But beware that a portfolio deal in the fourth quarter accounted for the majority of the record volume, and without it, the quarter would have had the lowest volume in recent years.
• Sales declined further in the first quarter of 2023, with only $60 million in total sales, the weakest quarter since mid-2020.
• Only 24 properties were sold in the first quarter, 32% below the average number of first-quarter deals in the past five years.
• Muted investment activity is likely to continue due to high-interest rates widening the gap between buyer and seller expectations.
• The top deal in March was the sale of Sycamore Ridge in Dublin for around $53 million, purchased by the Connor Group from Harbor Group International.
• Another notable deal in February was the sale of The Gemma for $6.1 million to a buyer from Texas. The property was fully occupied at the time of sale.
• The market has seen a shift in buyer profiles, with more out-of-state private and institutional buyers participating.
• National buyers accounted for over 90% of total sales volume in the past year, compared to an average of 70% in the previous five years

• Demand in the Columbus apartment market has slowed down while the supply of new units has increased.
• Net absorption in the past year was 60% below the pre-pandemic average, leading to a rise in vacancy rates.
• Weakness in the market is mainly seen in the 4 & 5 Star sector due to an influx of supply, while lower-rated segments have held up better.
• Rent growth in Columbus is decelerating but at a slower pace compared to the national average.
• Construction of new apartments in Columbus has been at a record level, representing 5.0% of the market inventory.
• Construction starts are decreasing, and the pace of deliveries is expected to slow down by 2025, allowing demand to catch up with supply.
• Despite market softening, Columbus has a positive outlook due to population growth, major investments, and increased job opportunities in the region.
• Housing needs in the next decade could reach as high as 19,000 units per year in the Central Ohio region based on historical data and job growth.

Source: Costar Group