Reichle Klein Group’s 2023 Year-End Apartment Market Overview

The Toledo, Ohio apartment market extended its lengthy stretch of solid performance in the second half of 2023 according to the results of the Reichle Klein Group’s year-end survey of the market. The overall market vacancy rate declined from mid-year 2023 and the fourth quarter of 2022 standing at 3.8% in our survey. Notably, this decline has occurred while the market has absorbed deliveries of newly constructed units.

All submarkets are near or below the overall market vacancy rate except for the downtown submarket where the vacancy rate increased to 6.4% from 5.7% at mid-year 2023 and 3.5% at year-end 2022. This trend bears watching.

Meanwhile, rents continued to increase, albeit at a slower rate than in the pandemic era. To frame it, since the end of 2019 the average rent per unit has increased from $736 per unit to $967 at December 2023, a 31% total increase and an average of 7.8% per year. By comparison, the average asking rental rate increased a modest 2% in 2023.

The effect of rising interest rates has yet to show up in the level of new apartment construction in the Toledo area. The number of units under construction increased from 444 at year-end 2022 and 524 at mid-year 2023 to 742 units in December 2023 following the delivery of 372 units in the second half of the year. Perrysburg remains the most active submarket for new communities. Other projects include a downtown warehouse conversion, and one each in west Toledo and Maumee.

In spite of the increase in interest rates, demand for apartments by investors is barely diminished. Transaction activity remains muted but that is primarily due to the lack of properties being brought to market. All of our recent offerings have attracted activity comparable to that received at the height of the market and we continue to receive multiple competitive offers on each.