Robust Apartment Demand Leads to Healthy Occupancy, Stabilizing Rent Growth, Says RealPage
Minneapolis has recorded the highest apartment occupancy level across the country as of mid-year 2017. Pictured is Laguna Apartments, a multifamily property constructed in 2016 and located at 2900 Irving Ave. South in Minneapolis.
RICHARDSON, TEXAS — Apartment demand surged to a near-record volume during second quarter of 2017, according to real estate technology and analytics firm RealPage Inc. With demand topping completions by a wide margin in the quarter, occupancy is essentially full and the annual pace of rent growth has stabilized.
Richardson, Texas-based RealPage tracks the 100 markets with the most existing apartment units. Santa Rosa/Petaluma, California is the smallest market RealPage tracks, with 25,144 apartments units. New York City, spanning nearly 2 million units, is the largest market. In order for an apartment building to be tracked, it must consist of at least five units, but the average property size is approximately 200 units.
RealPage reports that renters absorbed 175,645 apartments across the United States in the second quarter, up one-third from the performance level seen at the same time a year ago.
“Today’s strong demand for apartments reflects the combination of solid job formation, continued limited loss of renters to home purchase and widespread availability of appealing new apartments,” says Greg Willett, chief economist for RealPage.
Demand in the second quarter exceeded the 86,431 units completed in the same period, according to RealPage. However, the market is still working through the surplus of additions brought on stream late last year and early this year. RealPage reports that about 159,000 units were completed from October 2016 through March 2017, but there was virtually no net demand for apartments during that seasonally slow leasing period.
Average apartment occupancy among the top 100 markets as of mid-year stood at an even 95 percent, according to Axiometrics, now a division of RealPage. Mid-2017 occupancy topped the first quarter level of 94.5 percent, but trailed a bit behind the mid-2016 rate of 95.3 percent in the Axiometrics data set. The average is weighted by the number of units in each market, but New York is excluded because of its size.
With almost no vacancies recorded in the nation’s older apartment communities, product availability is concentrated in those brand new developments delivered recently.
“Total demand for new apartments is strong, but that demand is getting split among many individual projects in the country’s markets registering the most aggressive building,” says Jay Denton, vice president of Axiometrics.
Axiometrics reports 130 properties competing for initial residents in metro Houston. Projects in initial lease-up total 87 developments in Dallas and between 40 and 70 properties in each of metro Washington, Atlanta, San Antonio, Seattle and Charlotte.
As of mid-year 2017, Minneapolis-St. Paul recorded the highest occupancy level across the country at 97.4 percent. Milwaukee (97 percent) and New York (96.9 percent) rounded out the top three, according to Axiometrics.
Rents for new-resident leases rose 1.8 percent during the second quarter, taking the annual price hike to 3.6 percent, according to RealPage. After the pace of rent growth slowed throughout 2016, pricing increases are now stabilizing. The 3.6 percent annual rent growth seen as of mid-2017 is approximately the same as the 3.7 percent pace recorded in the first quarter.
Sacramento, California is the nation’s leader in annual rent growth for new residents in mid-2017 at 9.8 percent. Seattle (8 percent) and Riverside-San Bernardino, California (7.1 percent) round out the top three, according to RealPage.
Monthly rents now average $1,339 nationally in the RealPage data set.
— Kristin Hiller