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Market Reporting that Matters

November 2017 REIT Report

Top metros spur apartment REIT performance


Spurred largely by significant portfolio strengthening in Houston, Los Angeles and Atlanta, national apartment REIT effective rent growth increased 46 basis points (bps) to 1.6% in November. The leap was the largest since a 55-bps rise in September 2015.

November’s rate, the highest in 16 months, was 70 bps higher than the 0.9% of November 2016. As with the overall national trends, this was only the third time in the past seven years in which apartment REIT rent growth increased from October to November.

National rent growth was 2.3% in November, and the REITs’ 75-bps deficit was narrower than at any time since May 2016. The apartment REIT rate has been lower than the national rate for 21 straight months.


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Rise of the Three Big Metros

National trends are a compilation of what’s happening in metro areas, and when larger markets are on a similar pathway, it will affect the national line.

Los Angeles, Atlanta and Houston – with 34,194 REIT units, 14,635 and 12,838, respectively – are among the larger REIT concentrations. All three had an impressive jump in rent growth in November.

Houston, where apartment REIT weighted rent growth increased from 1.2% to 5.9% last month, was of course affected by the aftereffects of Hurricane Harvey. Tens of thousands of single-family homes and apartments were destroyed or rendered uninhabitable, so those left stranded needed a place to live. Vacancies at unaffected apartment properties came to the rescue.

With less inventory and increased demand, landlords were able to push rents.

Out west, Los Angeles’ REIT rent growth leap from 0.9% to 3.0% in November may very well be a reflection of a rent-growth surge of Class A properties in the market. From 0.5% in September to 2.9% in November, rents for “luxury” apartments have taken flight. As the chart below shows, Class C rent growth has gone into descent at the same time.


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Atlanta’s REIT rent growth has risen a little less sharply, from 1.5% in October to 2.3% in November. The rise, like Los Angeles’, may be because of the corresponding increase in Class A rent growth. This market is also dominated by Mid-America Apartments (MAA), which has 73.8% of the REIT units in Atlanta, and its portfolio had the smallest rent-growth increase of the three REITs in the market.


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If these three markets continue their upward REIT trend, national REIT rent growth should continue its momentum.

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

  • Orlando, FL (5.7%)
  • Las Vegas, NV (5.5%)
  • Richmond, VA (5.4%)
  • Jacksonville, FL (5.3%)
  • Sacramento, CA (5.1%)
  • Riverside, CA (4.5%)
  • Houston, TX (4.2%)
  • Phoenix, AZ (4.1%)
  • Columbus, OH (3.8%)
  • Minneapolis-St. Paul, MN (3.6%)


MSAs underperforming the national average included:

  • Seattle, WA (2.2%)
  • Boston, MA (1.8%)
  • Dallas, TX (1.7%)
  • Charlotte, NC (1.5%)
  • Philadelphia, PA (1.3%)
  • New York, NY (1.0%)
  • Washington, DC (0.4%)
  • Chicago, IL (0.3%)
  • San Francisco, CA (0.3%)
  • Austin, TX (-1.1%) 


REIT Occupancy Highest November Rate of Decade

REIT occupancy dropped in November for the seventh straight year, but the good news is that the latest rate of 95.9% was tied for the highest November occupancy figure this decade.

Occupancy dropped 25 bps from October’s 96.1% and was 10 bps higher than the 95.8% of November 2016. REIT occupancy has not fallen below 95.7% since February 2014.


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Year-to-date (YTD) REIT rent growth was 2.5% in November, 73 bps lower than October’s 3.2% as the annual year-end dip continued, according to the apartment rental data. However, this year’s decline is less severe than last year’s, so 2017 is no longer the lowest REIT post-recession YTD year.


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November’s YTD rent growth was 192 bps below the post-recession November average of 4.4%.


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Camden Keeps High Rent-Growth Status

Camden Property Trust’s (CPT) rent growth surge continued in November, keeping it in first place for year-over-year rent growth among tracked apartment REITs for the second straight month, with a rate of 3.9%.

After climbing 148 bps in October, CPT add 95 bps to the spurt in November to give the company a 113 bps advantage over second place Aimco (AIV). AIV had its own rent-growth surge in November, climbing 185 bps from its October rate to record 2.7% in November.

AIV also led rent growth on an annual trailing 12-month basis (ATTM) with a rate of 2.0%, followed by CPT and Avalon Bay (AVB) at 1.5%.

Essex Property Trust (ESS) was the REIT occupancy leader at 96.4%, followed closely by Equity Residential at 96.2%.


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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 apartment 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. 



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