5 Markets With the Greatest Occupancy Loss
- Oct 23, 2019
Nationwide, the average occupancy rate decreased 10 basis points year-over-year through August to 95.1 percent, according to Yardi Matrix data. While the top markets for occupancy growth saw surges of as much as 150 basis points year-over-year through August, the metros on this list had overall occupancy rates at least 80 basis points lower than last August.
5. Youngstown, Ohio
As production ended at General Motors’ automobile factory in Lordstown, Ohio, the nearby region has also been impacted. While the plant used to employ as many as 4,000 people a few years back, the number of workers had already decreased to about 1,400 before the closing. Youngstown’s economy took a hit following the general decline of the steel industry and closing of the General Motors facility. The metro’s unemployment rate reached 6.1 percent in July, a 20 basis points uptick year-over-year and among the highest in the nation. As a result, the metro’s population slid 4.2 percent from the 2010 Census until July 2017. The occupancy rate dropped 80 basis points year-over-year through August, to 96.2 percent, 110 basis points above the national average.
Development activity has been sluggish in Youngstown in recent years. In 2018, only one project came online, LRC Realty’s Enclave, a 65-unit student housing community. This year, National Church Residences has completed work on the fully affordable Broadway Park, which consists of 57 one-bedroom and three two-bedroom units.
4. Scranton-Wilkes-Barre, Pa.
Known for its manufacturing industry, primarily because of Procter & Gamble’s and Tobyhanna Army Depot facilities, the metro has slowly undergone a transformation. As AT&T, Fleet Financial Group, Cigna Health Care opened large offices in the area, attracted by the rather low price of doing business and highly educated workforce, the economy started to diversify. However, the metro’s population decreased by 1.5 percent since the last Census and as of July 2017, as wages didn’t keep up with both the rise in productivity and rent rates. As a result, the average occupancy rate declined significantly in recent quarters, after surpassing 98 percent at the end of 2017. The occupancy rate went down 90 basis points year-over-year through August to 95.7 percent, but still above the national average.
Construction activity slowed down last year and the trend continued in 2019. With only one project underway slated for completion by year’s end—The Bank, a 60-unit community in Wilkes-Barre—deliveries are projected to decrease by almost 65% from 2018.
3. Chattanooga, Tenn.
The metro has a strong employment market, having gained 3,500 jobs in the 12 months ending in August, most of them in the professional and business services (1,000 jobs). Multiple large companies, including Volkswagen and Google, invested heavily in the metro, thanks to its relatively low wages and easy access to talent. The metropolitan area’s population increased 5.4 percent since the last Census and as of July 2017. This, however, translated into a significant rise in rent rates, at 4.1 percent year-over-year through August, 70 basis points above the national average. This, combined with a spike in construction in 2019, negatively impacted the occupancy rate, which decreased 100 basis points year-over-year through August, to 94.7 percent.
Developers are projected to complete five projects totaling 877 units by year’s end, a twofold jump from 2018. With an additional 507 apartments underway expected to come online in 2020, Chattanooga’s occupancy rate is likely to continue to decrease, but at a slower rate.
2. North Central Florida
North Central Florida’s employment growth continued throughout the 12 months ending in August, when 8,000 jobs were gained, more than a third of which were in the education and health services sector. Gainesville, the metro’s largest city, had a 3.5 percent unemployment rate in July, down 20 basis points year-over-year. The city is mainly known for its advanced manufacturing, education, health care and life sciences industries, which benefit from the area’s business-friendly climate and highly educated workforce. Nationwide Mutual Insurance Co. is investing $74 million in upgrades to its Gainesville campus, with plans to add as many as 350 new jobs. Despite all of this, a rapid surge in construction brought down the occupancy rate by 100 basis points year-over-year through August, to 95.9 percent.
Following two years of above-average completions levels, developers are expected to add some 1,500 units by the end of the year, three quarters more than the previous years. The largest project delivered this year is Collier Cos.’ Canterbury Circle, located in Ocala. The 304-unit community was 98 percent occupied as of August.
1. Midland – Odessa, Texas
The metro, which is one of the top markets for multifamily rent growth, continues to grow thanks to its powerful oil industry, its main economic driver. Midland – Odessa saw outstanding demographic gains in recent years. The metro’s population increased by more than 15% since the last Census and as of July 2017, with most of the gains recorded between 2013 and 2015. Developers followed suit, completing a record 2,300 units in 2015, more than six times as much as the previous years. Thanks to high demand, the bulk of units completed that year has been quickly occupied. However, while demand dampened, construction activity picked up pace again this year, resulting in a decrease of 120 basis points year-over-year through August in the average occupancy, which stood at 94.5 percent.
Three projects totaling 826 apartments are expected to be delivered by the end of 2019, a 250% surge from the previous year. In Midland, Stonehawk Capital Partners completed work on The Woodford on Mockingbird, a 362-unit community, while in Odessa, Proffutt Limited Partnership delivered the 360-unit Legado Ranch. Greystar Management is in charge of management for both properties.