2018 Rent Growth Led by Strong Demand
Although rents were down 0.3 percent in the fourth quarter, December's year-over-year increase was up 20 basis points compared to November.
Showing the smallest annual increase since 2010, U.S. multifamily rents did not change in December, according to Yardi Matrix’s monthly survey of 121 markets. Rents remain at $1,359, a $4 drop from the highest rate achieved in September of $1,363. Over the past seven year, rents have grown by a minimum 3.3 percent annually, hitting its highest 5.4 percent in 2015, but ended 2017 with a 2.5 percent increase.
December’s year-over-year increase was up 20 basis points compared to November, leading into continued growth for 2018 brought on by a strong demand. Although rents were down 0.3 percent in the fourth quarter, that marks only the second negative quarter of growth since 2010, showing the market’s consistent performance strength during its recovery. The GDP recently had two strong quarters and due to lower corporate and personal tax rates, the economy shows no signs of slowing.
Secondary markets such as Sacramento, Las Vegas, Colorado Springs, Orlando and Salt Lake City should all see increases from the offered affordable rents and growing populations. Dallas and Atlanta will continue to see moderate gains, despite a slowdown in rent increases, while expensive coastal markets like New York City will likely see little to no gains due to excessive supply growth.
This heavy growth has caused occupancy to drop 50 basis points down to 95.3 percent over the last six months, causing the forecast to call for a continued decrease in occupancy for 2018. With a delivery peak of 360,000 in the coming year and most of those units being luxury, there is still a 60-basis-point spread that remains between RBN and Lifestyle occupancies, despite the drop.
To read the full report, visit the Yardi Matrix website.