Major REIT Markets Steady; Gap Between National Rate Decreases

Though annual effective rent growth in several major REIT markets remained negative, their numbers have not moved much in the past couple of months, which has helped to steady REIT rent growth.

Rent growth for the publicly traded apartment REITs was 1.0% for the second straight month. That rate has remained within a 19-basis-point (bps) range for the past four months, following a year of precipitous decline.

The primary reason for the decline from September 2015-September 2016 was the rent-growth free-fall in the San Francisco Bay Area, Houston and New York. Less severe moderation in other metros with a large REIT presence, such as Atlanta and South Florida, also drove the trend.

But, the rent growth figures for the Bay Area, Houston and New York, while still negative, have changed little the past few months. In fact, the California metros have increased very slightly:

  • San Francisco annual effective rent growth was -2.3% in December, compared to -3.2% in September.

  • San Jose rent growth has “strengthened” from -3.4% in September to -2.4% in December.

  • Oakland’s December rent growth was -0.6%, compared to -1.1% in November.

Meanwhile, New York’s -0.9% December rate was the same as November’s, though Houston fell 16 bps to -3.9%. Elsewhere, Atlanta and Washington, DC recorded slight rent-growth declines in December, while Miami increased slightly.

Some good news is that the national rate’s decline to 2.1% annual effective rent growth in December narrowed the gap between national and REIT figures to 1.1% in favor of the national rate.

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

  • Sacramento, CA (10.0%)
  • Riverside, CA (6.9%)
  • Las Vegas, NV (6.1%)
  • Phoenix, AZ (5.4%)
  • Salt Lake City, UT (5.4%)
  • Fort Worth, TX (5.2%)
  • Seattle, WA (4.8%)
  • Atlanta (4.4%)
  • Warren, MI (4.2%)
  • Anaheim, CA (4.1%) 

MSAs underperforming the national average included:

  • Miami (2.1%)
  • Washington, DC (2.1%)
  • Chicago, IL (1.5%)
  • Austin, TX (1.2%)
  • Boston, MA (1.2%)
  • Philadelphia, PA (0.3%)
  • New York, NY (-0.9%)
  • San Francisco, CA (-2.3%)
  • San Jose, CA (-2.4%)
  • Houston, TX (-3.9%) 


Occupancy Also Remains Steady

REIT occupancy was 95.8% in December, essentially the same as November and 7 bps higher than the 95.7% of December 2015. REIT occupancy did not fall below 95.8% in 2016 and outperformed the national occupancy rate of 94.5% in December.

MAA Still Leads in First Month of Merger

December marked the first month in which Mid-America Apartments’ (MAA) data included the former Post Properties (PPS), after the deal was completed on Dec. 1. And even though MAA absorbed the lower-performing PPS, it maintained its position as the apartment REIT with the highest year-over-year (YoY) effective rent growth.

MAA’s 3.1% rent growth was lower than the 4.5% recorded by the old MAA in November and the 3.7% that the combined company would have experienced that month. Those figures take into account the fact that the old MAA’s properties were primarily in higher-performing suburban markets, while PPS’ concentrations were mainly in urban-core submarkets.

Meanwhile, MAA’s 4.4% average rent growth throughout 2016 was second only to Milestone Apartments’ (MST.UN) 5.8%. 

Many REITs Still Grouped Together

Aimco (AIV) had the second-highest year-over-year rent growth at 2.6%. Six of the seven other REITs continued to be bunched together in a 98-bps range from 0.4%-1.4%, while one REIT recorded negative rent growth.  

As mentioned, MST.UN led the pack in average trailing 12-month rent growth, followed by MAA and Essex Property Trust (ESS).

UDR Inc. retained the occupancy lead among the REITs at 96.7%, followed by Equity Residential (EQR) and ESS, both at 96.2%.


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. 

Please contact us if you have any questions.

Jay Denton

Senior Vice President, Analytics


Office: 214-953-2242


Stephanie McCleskey

Vice President, Research


Office: 214-953-2242

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