Industry News

Market Reporting that Matters

April 2017 REIT Report

REIT Rent Growth Up in April

Down one month, up the next. The trend of annual effective rent growth among the publicly traded apartment REITs is relatively steady, and the rate increased to 1.4% in April after falling to 1.2% in March, according to Axiometrics apartment market data.

April’s rate was 16 basis points (bps) higher than March’s and 219 bps lower than the 3.6% of April 2016.

With national rent growth remaining relatively steady at 2.2%, the REITs’ gap with the national rate, 78 bps in April, was the narrowest it has been since May 2016. The REITs have now underperformed the nation for 13 straight months.

  Click to enlarge in new tab.

Average REIT rent was $1,943 per unit, per month in April. That $16 increase from March’s average marked the fourth straight month the rent level has increased, the apartment data showed.

The increased apartment REIT rent growth can be partially attributed to strengthening in several West Coast markets with a strong REIT presence. For example, San Jose and San Francisco overall rent growth increased 183 and 162 bps, respectively, to 2.8% and 1.5%. Already strong Los Angeles jumped 86 bps to 3.6%, and Seattle kept up its robust growth with a 70-bps leap to 5.8%.

The Metropolitan Statistical Areas and Metropolitan Divisions among Axiometrics’ Top 50 apartment markets with the highest annual effective rent growth in April were:

  • Sacramento, CA (8.8%)
  • Riverside, CA (5.8%)
  • Seattle, WA (5.8%)
  • Salt Lake City, UT (5.4%)
  • San Diego, CA (5.0%)
  • Anaheim, CA (4.5%)
  • Orlando, FL (4.4%)
  • Fort Worth, TX (4.4%)
  • Phoenix, AZ (4.1%)
  • Long Island, NY (3.9%)

MSAs underperforming the national average included:

  • Miami, FL (2.1%)
  • Boston, MA (2.0%)
  • Portland, OR (2.0%)
  • Washington, DC (1.8%)
  • San Jose, CA (1.5%)
  • Chicago, IL (1.1%)
  • Nashville, TN (0.8%)
  • Austin, TX (-0.3%)
  • New York, NY (-0.9%)
  • Houston, TX (-3.1%) 

Occupancy Rises Slightly

The apartment REIT occupancy rate was 95.8% in April, up 6 bps from March’s 95.7%, marking the second increase in the past three months. April’s rate was 11 bps lower than the 95.9% of April 2016. The rise was to be expected, since occupancy has increased from March to April in all but one post-recession year – and usually by less than 10 bps.

  Click to enlarge in new tab.

REIT Year-to-Date (YTD) rent growth increased 87 bps to 3.7%, essentially level with the post-recession average.

April’s YTD growth was the fifth highest April rate since the recession, with 2015 and 2012 the clear leaders at 4.5% and 4.3%, respectively, according to the apartment market data.

  Click to enlarge in new tab.


   Click to enlarge in new tab.

April’s rate was 2 bps above the post-recession average of 3.7%.

  Click to enlarge in new tab.


Performance in Top REIT Submarkets

Conversations in the apartment industry have focused on new supply for some time now, and rightfully so, considering the 372,000 units expected for 2017 delivery is the highest total since Axiometrics started tracking the industry in 1996.

With new supply, it is important to consider not only the overall amount, but also where it is being delivered at a hyperlocal level.

Consider this – if you are an operator and new properties enter your neighborhood, this increases competition in your area. As new properties tend to offer concessions to further entice potential residents, this will likely affect rent growth performance at your property (for example, your stabilized property may have to offer concessions to compete with new product).

Apartment REITs have been seeing this recently. While performance can vastly differ on a property-to-property basis, the general trend is that REIT performance has been affected. To help highlight this impact, Axiometrics has provided an analysis on a few major REIT markets and the impact of new supply in a few select submarkets.


More than 3,000 new units were delivered to the Oaklawn submarket in 2016 resulting in an impressive annual inventory growth of 12.0%. This large of an increase in such a short time helps illustrate why the submarket has experienced negative annual rent growth early in 2017. As of April, annual rent growth is -0.63% in the Oaklawn submarket

The Oaklawn submarket has a heavy concentration of REIT properties, with more than 4,000 REIT units. This wave of new supply has caused performance among REIT-owned properties to slip to -0.29% as of April 2017.

Fortunately for the greater Dallas area, job growth has continued to be phenomenal (annual growth of 4.1% in 1Q17). This strong, sustained job growth likely means that although annual rent growth in the Oaklawn submarket is currently negative due to elevated supply levels, the outlook beyond 2017 is positive.

  Click to enlarge in new tab.

  Click to enlarge in new tab.

San Francisco Bay Area

The San Francisco Bay Area has been brought up time and time again because of its slowing rent growth which is the byproduct of decelerating job growth, new supply and unaffordability. The San Francisco Bay Area is notorious for its sensitivity to changes in job growth as highlighted by the following example.

In 2016, roughly 1,500 units were delivered in the Northeast San Jose submarket, compared to 2,500 units in 2015. Conventional thinking would suggest that, all things equal, such a large drop in new units would result in improved performance.

But even as supply significantly pulled back in the Northeast San Jose submarket, the market-wide slowdown in annual job growth from 3.9% in 2015 to 2.7% in 2016 resulted in an incredible 900 bps drop in annual rent growth in 2016.

Supply in the Northeast San Jose submarket has been swollen for some time now however, so the impact of new supply on an area should not be discounted. Annual job growth of 2.7% in 2016 was still an admirable 150 bps above its long-term average, so the continuously high level of new supply in the metro is partially to blame for slowing rent growth.

The good news is the San Jose market has improved in early 2017, up to 1.48% in April 2017 – an improvement of 380 bps from December 2016. REIT-owned properties in the Northeast San Jose submarket have shown improving performance as well, achieving annual rent growth of 2.02% as of April 2017.

  Click to enlarge in new tab.

  Click to enlarge in new tab.


A barrage of new supply doesn’t always spell disaster when it comes to performance. As long as a metro is able to maintain steady job growth, the impact of new supply on apartment market performance can be mitigated.

Atlanta has been somewhat of a poster child for that sentiment, as rent growth has been relatively steady considering the amount of new supply in the metro.

More than 10,200 units were delivered to the Atlanta/Fulton submarket, which includes Downtown, Buckhead and Midtown, in 2015 and 2016, more than any other submarket in the nation. These two years combined results in an inventory growth of 11.7% in the submarket.

The good news for REIT properties in the submarket is that fundamentals in Atlanta are still good, although rent growth among REIT properties in the market is considerably below the market average. Annual rent growth among REIT properties in the Atlanta market was 0.0% as of April 2017. REIT performance should improve in the future once this swell of new supply is absorbed, as Atlanta continues to be a metro with strong job growth.

  Click to enlarge in new tab.

  Click to enlarge in new tab.

Los Angeles

No other area in the nation has as many REIT units as the combined Los Angeles and Anaheim metros, with almost 60,000 REIT-owned units. In fact, the Marina Del Rey/Venice submarket has more REIT-owned units than any other submarket.

New supply in Los Angeles has been less of a factor than in the San Francisco Bay Area, but some submarkets were certainly subject to increasing supply numbers in 2015 and 2016. Marina Del Rey/Venice (4,118 new units, or 12.3% inventory growth) and Westlake/Downtown (3,848 new units, 6.7% inventory growth) both received ample amounts of new supply in 2015 and 2016.

The Marina Del Rey/Venice submarket slowed in 2016 from the previous year, but has experienced strengthening rent growth in early 2017. The Westlake/Downtown submarket has continued to slow in 2015 and 2016, but is still above the national average.

For a submarket with ample new supply, REIT-owned properties in the Marina Del Rey/Venice submarket have performed extremely well recently, with annual rent growth of 4.95% in April 2017. The Westlake/Downtown submarket has seen somewhat softer performance over that same time period, with annual rent growth of 2.3%.

  Click to enlarge in new tab.

  Click to enlarge in new tab.



AVB Assumes Rent-Growth Lead

Avalon Bay (AVB) recorded the highest year-over-year (YoY) effective rent growth among the REITs in April, knocking Milestone Apartments (MST.UN) from the No. 1 position just as it exited the REIT stage.

AVB’s 2.5% rent growth was 8 bps higher than Equity Residential’s (EQR) 2.4%, while Essex Property Trust (ESS) was third at 1.7%. All other REITs had rent growth of less than 1%, with two of them in negative territory, according to the apartment data.

MST.UN, whose acquisition by Starwood Capital closed on April 28, the last business day of the month, continued to record the highest average rent growth for the 12 months ending in April. Its 4.2% average trailing 12-month (ATTM) rate far exceeded No. 2 Mid-America Apartments’ (MAA) 2.4%.

UDR Inc. continued to have the highest occupancy rate, at 96.7%, some 20 bps higher than ESS’ 96.5%.  

  Click to enlarge in new tab.

Accessing the Data Files

The data files can be accessed by logging into the AXIOPortal®. Go to the Publications tab, select “Trend Report” under Category, then search for “REIT” in the “Search Publication Name” box. Select “REIT” in the Type dialogue box.

Student Housing REIT information can be accessed by clicking on the Publications tab, then, under Category, selecting “REIT Report” under the Student Housing section.

Please note that Aimco (AIV) does not allow its properties to disclose occupancy rates. Axiometrics readjusts AIV's occupancy data after each quarterly earnings release. Between releases, we apply the average REIT growth rate in each market to AIV's properties. We apply the submarket's average growth rate if there is no REIT presence in the market.

Remember that rent and occupancy levels in those files are not same-store throughout time, but the growth rates are same-store for each month. You may view how the unit counts change at the bottom of the Effective Rents tab. The file with "Rolling 13 Month" in the name represents annual changes by month.


Javascript is not enable. This may affect content rendering. You can enabled Javascript in your Settings Menu.