US Apartment Metros Outlook: Houston best-placed for 2025-29 apartments recovery

The apartment market is on track to recover over our five-year forecast, with new supply falling back sharply, while demand remains solid. However, the size and speed of recovery will differ widely by region. The largest vacancy rate declines – around 300bps – are expected in Phoenix and Houston, where tighter new supply and strong demand fundamentals create the most favorable conditions for landlords. This will result in rents growing by an average of 4% p.a. in 2025-29. Conversely, Miami will see much cooler rent growth of 2% p.a. as it continues to grapple with a large supply pipeline – a challenge also facing D.C., where we expect rent growth to be even weaker. Markets with rapidly rising occupancy – including Phoenix, Houston, Dallas, and Atlanta – are best positioned for a strong recovery in capital values. Accordingly, we expect these markets to return 8% p.a. over the five-year forecast. (See Chart 1.) At the other end of the spectrum, Portland, San Francisco, and San Diego are likely to see the weakest recovery in capital values, leading to underwhelming returns.