Apartment Rents, Occupancies Still Rising

According to Axiometrics, national effective rents for the U.S. apartment market increased 0.54 percent from June to July, bringing year-to-date effective rent growth up to 4.42 percent.

Dees Stribling, Contributing Editor

Dallas—According to Axiometrics Inc., national effective rents—rents net of concessions—for the U.S. apartment market increased 0.54 percent from June to July, bringing year-to-date effective rent growth up to 4.42 percent. While new apartment deliveries have yet to impact rent growth, the company posits, the rate of new deliveries is accelerating, with about 56,000 units set to be delivered in the last six months of 2012 and 129,000 units going online in 2013.

Dallas-based Axiometrics is forecasting full-year effective rent growth of 4.1 percent for 2012. But reaching that level depends largely on what happens during August and September, before normal seasonal slowing during the last quarter of the year. If the market performs somewhere between how it did during these two months in 2010 and 2011—with rent growth in 2011 being somewhat slower than it was in 2010—Axiometrics says that full-year effective rent growth could still rise as high as 4.3 percent.

Since the summer of 2011, when the U.S. apartment market saw red-hot growth in rents and occupancies, there’s been a gradual moderation in both effective rents and occupancy growth, Axiometrics president Ron Johnsey notes. Though the market is still near historical highs for both, going forward he expects that the market will likely perform closer to the extended period of stable rent growth seen in the late 1990s, rather than the up-and-down market seen more recently.

The national occupancy rate remained essentially the same month-over-month, declining a scant 3 basis points from 94.36 percent in June to 94.33 percent in July, though the rate is up almost three-quarters of a point year-to-date. Class A and B properties have generated little growth in occupancy this year, remaining around 95 percent, while Class C properties have had the highest year-over-year occupancy growth.

As a group, REIT properties, which account for about 12 percent of the Axiometrics database, continue to outperform the broader national market. REIT properties have grown rents 6.46 percent year-to-date, compared to 6.35 percent during the same period of 2011. However, in 2011 REIT properties lowered rents each month from August to December, thus the July 2012 results could be the peak year-to-date growth rate seen for them the rest of this year.

The national rate masks diversity in individual markets. Axiometrics also reported on those markets that have seen the most change, positively and negatively, since last July. Corpus Christi was the most improved market, with annual rent growth climbing from 3.22 percent last year to 7.74 percent this year. Six other markets increased their annual growth rate by at least 2 percentage points from last July.