The risk of oversupply is decreasing in most multifamily markets

Both the Inland Empire and San Jose lead the nation in relative risk of oversupply, as they have just over 3.5 years of construction left, according to the report. That means demand will have to accelerate as those units are delivered to prevent a glut of new supply. However, San Jose and the Inland Empire differ in the analysis, as the Inland Empire’s vacancy rate is higher than it was in 2019, while San Jose’s is lower than it was in 2019.

Markets like Austin and San Antonio are shifting the risk curve higher as vacancies rose slightly amid strong deliveries, according to the report. For those markets, the combination of increased vacancies and deliveries adds an extra year to the recovery, assuming demand holds steady, Cusman & Wakefield said.

The top five markets for oversupply risk are rounded out by Miami, New York and Charlotte. At the lower end of the risk profile, with fewer years to absorb supply, are Minneapolis, Jacksonville, Louisville, Richmond and Orlando.

While some markets still have significant construction pipelines, the surge in demand suggests the worst may be behind us for most markets, Cushman & Wakfield said. Assuming the economy avoids a recession and demand remains steady, the degree of oversupply is likely to abate quickly, leading to improved fundamentals and property values, even in a higher-interest-rate environment, the firm said.