Dallas–Axiometrics Inc., a multifamily data and analysis providor, released a research report today that shows the national apartment market continuing to heat up in May, with effective rents (rents net of concessions) increasing 0.7 percent from April levels. Axiometrics estimates that effective rents will rise 5.9 percent in 2011, which would be the largest annual increase since a rate of 5.8 percent in 2005.
Year-to-date, effective rents nationally have risen 3.17 percent, as compared to 2.55 percent in 2010. Top performing submarkets for annual effective rent growth in May included San Jose (13.0 percent), San Francisco (9.7 percent), Austin (8.7 percent), Seattle (8.5 percent), Boston (7.4 percent) and Dallas (6.5 percent).
Axiometrics President Ron Johnsey says, “With year-to-date increases in effective rents, and continued strong occupancy levels, renters who are able might be wise to sign longer term leases as property owners in most markets will maintain pricing power at least through the rest of 2011.”
Additionally, the national occupancy rate increased for the 12th time in the past 16 months, rising from 93.3 percent in April to 93.96 percent in May. From January through May 2011, the occupancy rate has increased 86 basis points (bps), which is below the rate of 136 bps for the same period of 2010. Axiometrics says that the slowdown in absorption can be attributed partially to the increase in effective rents year-to-date. But occupancy in May was still above the previous peak of 93.5 percent reached in August 2008.
From May 2010, eight major markets increased occupancy by more than 100 bps and have rates above 95 percent: New York, Minneapolis, Austin, San Jose, Cleveland, Orange County, Chicago and Denver. Some of the most overbuilt markets are recovering rapidly as well. Six major markets that had low occupancy rates in May of 2010 have increased their occupancy levels between 142.5 and 333.4 bps: Charleston, Charlotte, Dallas, Orlando, Phoenix and Houston.