Record Occupancy, Job Growth Bolster Reno Multifamily Market
It’s starting to feel like the 1970s all over again in Reno’s multifamily market. This is particularly true in terms of occupancy. A recent report from RealPage noted the current market’s eye-popping 97.3 percent multifamily occupancy level. This figure was only eclipsed once, nearly four decades ago, at a double eye-popping 97.9 percent when the region experienced a spike in new jobs. Reno’s total job count continues to grow at a record pace, fueling a nearly full apartment market.
But, of course, the housing and job markets in Reno are both much larger than they were in the ‘70s, though there are similarities. In fact, current market conditions bring to mind the ages-old adage, “Those who fail to heed the lessons of the past are condemned to repeat them.” Developers cannot build multifamily units fast enough to sate demand. New residents arriving for new jobs cannot easily find an apartment, and those who do may have to pay a higher-than-expected rental rate.
Consider this from the U.S. Bureau of Labor Statistics: Reno’s economy expanded during the four years ending in May 2018 (the latest statistics available from the Bureau) by a steady 4.2 percent. This was an enviable gain for any municipality, region, county or state. That growth in jobs fuels higher demand for all types of new housing, particularly multifamily units for these new workers. Reno’s total job count during the same period stood at about 23,200 positions, or 10.7 percent above employment levels posted during the first quarter of 2008, RealPage noted.
Reno’s multifamily market eased following a brief pickup in 2016 but, like many other metropolitan regions across the country, there’s been a sharp increase in supply over the past two years as the economy continues to strum along at historic levels in every category of growth.
ReaPage also predicted that expansion in the Reno apartment market is expected to accelerate at least through 2019 as the stock of apartments is slated to grow by 5.4 percent. This will bring about the addition of roughly 2,300 units this year, the largest annual supply volume since the research organization began tracking the market.
Solid demand and limited new supply has kept the Reno apartment market very tight for years, with occupancy levels as high as 97 percent. Reno’s multifamily occupancy levels ranked in the top 10 markets nationally at the end of the second quarter of this year. Rental rates have remained elevated for the past four years with such overwhelming demand and some of the highest occupancy levels on record for the Reno market.
Annual rental rates climbed markedly between 2016 until early this year, with the upticks ranging from 9 percent to 12.5 percent during that period. Those rates have now moderated somewhat and, by the end of the second quarter of this year, average rents rose by 3.4 percent. Year over year, rental rates increased by 7.8 percent in Reno, the lowest annual increase in 10 quarters, but a number many other regions would envy.
— By Keith Karpé, director of public and media relations, Western region, Colliers International. This article first appeared in the November 2018 issue of Western Real Estate Business magazine and was adapted from RealPage Inc.’s Q2 report on the Reno multifamily market