Apartment Demand Rebounds in 1st Quarter as Supply Volumes Continue to Slow

The U.S. apartment market saw demand bounce back in 1st quarter, but annual absorption remains slightly below the decade norm.

The nation absorbed nearly 93,300 in the first three months of the year, marking one of the strongest 1st quarter performances in the past decade. This demand swell more than made up for the net move-outs seen at the end of 2025. Still, annual demand totaled just over 303,000 units, trailing the decade average of about 340,000 units.

Apartment supply volumes are also slowing and have now returned to the decade norm. Roughly 367,000 units wrapped up construction across the U.S. in the year-ending 1st quarter 2026, including about 75,200 units in the first three months of the year. This marks a fifth consecutive quarter of declining annual supply after deliveries peaked at over 589,000 units in late 2024. This latest round of apartment deliveries was about in line with 10-year average annual completion volume.

With demand still soft relative to recent supply, U.S. apartment occupancy slipped below the essentially full threshold at the end of 2025 and has yet to recover. Occupancy in 1st quarter stood at 94.9%, up a modest 10 basis points (bps) quarter-over-quarter but still 20 bps lower than the year-earlier showing.

Rents Increased – Just a Bit – in 1st Quarter

After two consecutive quarters of decline, rents inched up slightly in 1st quarter, rising 0.4%. Still, the recent increase wasn’t enough to alleviate previous cuts, leaving effective asking rents 0.5% below year-earlier rates.

Concessions remain widespread. Roughly 25.5% of apartments were offering concessions as of 1st quarter, with the average concession at 7.2%. As operators prioritize occupancy heading into peak leasing season, concession usage may expand further, delaying meaningful rent growth until these incentives begin to burn off.

Rent Cuts Persist in High Supply and Tourism-Driven Markets

Heavy construction volumes continue to weigh on rent performance. Supply-heavy regions like the South and West recorded year-over-year rent declines, while the Midwest and Northeast, where new supply has been more restrained, saw modest rent increases.

Some of the steepest rent cuts remained concentrated in high supply markets that have dominated the price‑decline rankings in recent quarters. Austin posted year-over-year rent losses exceeding 7%, Denver saw declines of more than 6% and Phoenix recorded cuts near 5%.

Meanwhile, markets that depend more on tourism, such as San Antonio, Tampa, Nashville and Las Vegas, continued to lose momentum in 1st quarter. Softness in these markets can signal early economic strain, as consumers often scale back discretionary travel and leisure spending when financial pressures mount.

Coastal Tech and Midwest Markets Continue to See Rent Growth

In contrast, several coastal tech hubs continued to outperform. San Francisco, San Jose and New York all posted rent growth in the past year, supported by factors such as return‑to‑office initiatives, renewed optimism around artificial intelligence industries and easing supply pipelines. Virginia Beach also emerged as a standout, with rents climbing more than 4% year-over-year.

A number of Midwest markets with limited new supply also sustained steady rent gains. Chicago, St. Louis, Cleveland, Cincinnati, Minneapolis, Milwaukee all recorded annual growth between roughly 2% and 4% in the year-ending 1st quarter. Kansas City came close, just missing a spot on this list, with growth of 1.6%.