Market-Rate Demand Continues, But Less So in High-Price Cities
Third-quarter leasing results show variety region by region and submarket by submarket.
The demand for market-rate and luxury apartments remains strong in many markets―except for some of the nation’s most expensive areas, including the Northeast and along the West Coast.
The National Multifamily Housing Council reports that the U.S. needs to build an average of 328,000 apartments every year through 2030 to accommodate both household growth and losses to existing housing stock. But demand varies greatly by market―and sometimes within the market―depending upon the impact of COVID-19.
“For the last four to six months, luxury product has continued to be delivered to select submarkets in Central Florida,” said Jay Ballard, a managing director at Jones Lang LaSalle in Orlando. “There are properties with strong leasing activity, and that would indicate that they’re not susceptible to the impacts of COVID-19, whereas other submarkets that are more directly correlated to areas that have been impacted by job loss in the tourist quarter are still leasing but leasing a little slower.”
RealPage data also shows regional variations. The firm reported that leasing was strong in the third quarter, with especially strong demand in Dallas, Atlanta and Houston.
In contrast, apartment demand was weak in some of the country’s most expensive markets, such as New York, San Francisco, Seattle, Chicago and Washington, D.C. Still, according to RealPage, the country’s apartment occupancy rate in the third quarter was 95.6 percent, up from 95.3 percent in the previous quarter and just a little below the 96.3 percent a year prior.
And, despite Apartment List reporting that since March rents are down in 41 of the 100 largest U.S. cities, market-rate and luxury apartments continue to come online and command strong rents.
One example is Novo Las Olas, a 341-unit apartment project in downtown Fort Lauderdale by Stiles Residential Group. Apartments feature premium finishes, such as quartz countertops and wood-plank style flooring, as well as amenities such as a resort-style pool, a fire pit, a co-working lounge and pet facilities. Rents range from $1,800 to over $4,000 per month for studios to three bedrooms sized from 600 to 1,400 square feet.
Still, JLL’s Ballard is cautiously optimistic about the forecast for next year. “I think the impact of COVID-19 will slow some development,” he said. “But there is still an abundance of capital and an undersupply of product relative to overall market demand.”
Sector Insights rotates among market rate/luxury housing, workforce housing, low-income housing, student housing, senior housing and mixed-use.