Apartment Concessions Ease as Supply Pipeline Shrinks

In July, 15.8% of stabilized U.S. apartment units carried some form of discount, RealPage data show. That was down 70 basis points from June — a second straight monthly decline. The average giveaway still amounts to nearly six weeks of free rent on a 12-month lease. But the direction, not the level, is what underwriters will notice: after a year of essentially stable vacancy, two consecutive declines can shift assumptions.

The retreat is uneven. Class-A apartments are the only tier where concession use is down year over year, RealPage reports, while Class-C usage is rising. The newest supply has been most competitive at the top of the market; pricing power is returning there first.

U.S. apartment vacancy fell to 8.9% in the second quarter. That is the first time it has been below 9% since 2024, Cushman & Wakefield reports. The firm calls the 35-basis-point decline the first meaningful drop after a year of stability. Absorption totaled 124,600 units, the strongest demand reading since mid-2024. That was up 8% year over year.

That demand is finally working through the supply that began with pandemic-era groundbreakings. July deliveries totaled 329,000 units, Bisnow reported. The monthly total was down 14.8% from June. Compared with a year earlier, it was down 25.6%. Less new supply is taking pressure off the newest Class-A buildings, where concession use is falling.

Multifamily construction starts ran at a seasonally adjusted annual rate of 421,000 units in July, according to the U.S. Census Bureau. That was down 7.1% year over year. It also ran 15.6% below June. First-half starts totaled roughly 110,000 units, Cushman & Wakefield analysts wrote in their second-quarter sector report. That is the lowest since 2012, and the supply outlook points to further declines through 2027.

CoStar's Apartments.com has already rewritten its near-term forecast. The listing platform now expects vacancy to fall to 8.2% by year-end. It sees rents growing 1.4% in the third quarter. Grant Montgomery, CoStar's national director of multifamily analytics, tied the upgrade to 'the near-term rent growth outlook reflect[ing] second-quarter rent trends slightly exceeding expectations' and stronger employment assumptions.

Demand is up, deliveries are down, and first-half starts are at their lowest since 2012. That is the setup for a 2027 supply gap; underwriting that treats today's concessions as permanent will miss it. Still, 15.8% of stabilized units carry discounts. Vacancy sits above 8%. The landlord's market is coming, but it is not here yet.

Class-A concessions have already turned. Class-C is the laggard. When the lowest tier starts pulling discounts too, the trough will have cleared for the whole market, not just the newest buildings.