MultiFamily Rent Growth Posts Best Showing Since 2011
By Paul Bubny | National
DALLAS—Annual quarterly effective rent growth for US apartments reached 5.0% for the first time in four years, says Axiometrics. As a further indicator of multifamily’s ongoing strength, all of the top 50 markets tracked by the Dallas-based research and analysis firm showed positive quarterly effective rent growth in the second quarter, compared to 36 markets in Q1 of this year and 14 markets in Q4 of 2014.
“We’ve been seeing steady 5% rent growth in our monthly reporting, so the quarterly number is right on track,” says Stephanie McCleskey, VP of research at Axiometrics. She adds that Q2 is traditionally strong for apartment rent growth, “as school has ended and weather is warmer.” The quarter-over-quarter rent growth of 2.7% was equal to the figure Axiometrics reported the year prior, and a big step up from the 0.9% growth recorded in Q1.
The main drivers for the multifamily market—including job growth, population growth, single-family home affordability and propensity toward renting—all are “beneficial to rent and occupancy growth,” McCleskey says. “At this point, affordability could become an issue in some markets, and the high rent-growth levels in other markets are unsustainable.”
Also up quarter-over-quarter was occupancy; however, in contrast to Q2’s quarterly rent growth repeating the results seen a year earlier, occupancy was up on a year-over-year basis, as well. The quarter ended with occupancy of 95.2%, up 48 basis points from the previous quarter and an increase of 80 bps from the year prior. This past quarter marked only the second time in which occupancy surpassed 95% since 2001; the other time was Q3 of last year, when the occupancy rate was 95.1%.
“Occupancy has historically increased in the second quarter,” says McCleskey. “The significance of the 95% milestone is that we consider a market or property functionally full at that level. With record new supply coming to market, the fact that the occupancy rate continues increasing demonstrates the strength of the market.”
According to Axiometrics data, 62,403 new apartment units were slated for delivery nationwide during Q2, representing about 22.5% of the total 277,224 units forecast to come to market in 2015. Last year, 217,555 units were delivered.
Reflecting the broadening of the economic recovery, other cities besides the Bay Area’s leading metros took their turns in the lineup for highest annual effective rent growth. Although Oakland, CA still had the highest annual effective rent growth rate among the Axiometrics top 50 markets, San Francisco dropped from second place to sixth. San Jose kept its fourth-place ranking even as its rent growth declined slightly.
Taking San Francisco’s place at No. 2 was Portland, OR, moving up from No. 6, while Denver and Sacramento remained at Nos. 3 and 5, respectively. Oregon’s largest city also topped the rankings for quarterly effective rent growth, with a 6.5% increase over the previous quarter.
Seattle jumped from No. 9 to No. 7; Riverside, CA came into the top 10 at No. 8, up from No. 17; Phoenix climbed two notches from No. 11 to No. 9; and Atlanta dropped from No. 8 to No. 10. With annual effective rent growth of 6.7%, Atlanta was also the highest-ranking Eastern metro. Boston displaced New York as the strongest Northeastern market, and also came in second behind Portland for quarterly effective rent growth.
