Low Apartment Turnover Benefits Landlords with Better Pricing

Updated May 29, 2025

A striking trend is emerging in teh apartment rental market: low turnover ‌rates. Real estate analyst Alex Goldfarb at ⁤Piper Sandler noted that major landlords are experiencing turnover as low as 30%, ​a meaningful drop from the typical 50%. This shift is creating favorable conditions⁢ for landlords, leading‍ to better pricing on renewals and improved cash flow.

Several⁤ factors contribute to this trend.The unaffordable for-sale market, coupled with a limited rental supply on‍ the coasts, is prompting renters to stay put. Economic anxieties, moving costs, and‍ a preference for larger, more agreeable ⁤suburban apartments further discourage relocation.This apartment‍ rental stability directly impacts the multifamily REIT sector.

Goldfarb highlighted‍ that landlords are benefiting​ from increased renewal rates, reducing expenses associated⁣ with repairs, painting, and cleaning between tenants. He⁢ favors Essex Property Trust, citing its strong West‍ Coast presence.​ Equity Residential also ⁣stands to gain from its regional footprint.

The resurgence of San Francisco and Seattle, fueled by artificial intelligence and tech companies⁣ like Amazon mandating a return to office, has positively influenced the real estate market. However, ⁣Goldfarb remains neutral on the​ Sunbelt, despite strong performances ⁤from companies like Camden Property Trust and Mid-America Apartment Communities in‍ the first quarter. These Sunbelt companies could face challenges if a recession leads to job losses.

CBRE reports that after declines last year, rents are rebounding,⁣ increasing 0.9% year-over-year in the first quarter. This recovery is attributed to the strongest positive net absorption as ⁣2000, more than triple the pre-pandemic first-quarter average. The low ⁣turnover has contributed to⁤ this positive trend.

“The consequence is landlords are getting better pricing from renewals, as people don’t wont⁤ to leave,” said Goldfarb. “It⁣ also improves [thier] cash flow, because of lower turnover costs.”

Kelli Carhart, leader of multifamily capital markets ​for CBRE, noted‍ that the first ⁣drop in vacant units in over two years⁣ signals a crucial turning point. The multifamily vacancy rate has ​fallen to 4.8%,⁣ below its long-term average of 5%.

What’s next

Carhart⁢ anticipates increased investment activity in 2025 as improving fundamentals ⁤continue ‌to drive investor confidence and capital deployment in the multifamily sector.