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Apartment Market Data Shows Some Light

Rent Growth Steady in October

By Jay Denton | Thursday, November 10, 2016

National apartment market data showed some rays of sunshine in October, as a six-month streak of annual effective rent growth declines was arrested and signs of stabilization started to appear nationwide.

October’s 2.6% rent growth was essentially the same as September’s figure, and actually increased 2 basis points (bps) when rounded to two decimals. This was the first time since March that the rate increased. October rent growth was 226 bps lower than the 4.9% of October 2015, the point at which the market began its moderation from the peaks of earlier in 2015.

Annual effective rent growth remained above the long-term average of 2.2%. Several other signs point to potential stabilization of apartment market trends in the near future.

Some 42 metros of the Axiometrics Top 120 – based on number of units – achieved annual rent growth of 4.0% or higher – almost double the national long-term average. And that’s as the nation is approaching seven years of increased rent levels.

More than half of the 50 most major markets (26) are outperforming the national rate.

The 2.8% increase in wage growth reported by the Bureau of Labor Statistics on Nov. 4 could be a boon to property owners and managers; the more people make, the more they can spend on housing.

Occupancy Down as Usual in October

The national occupancy rate fell 23 bps to 94.9%, the first time apartments nationwide have been less than 95% occupied since February. But this is typical for October: Occupancy has declined in the 20-bps range from September to October in five of the seven years since 2009. It declined about 10 bps in the other two years.

The latest rate was 27 bps lower than the 95.1% of October 2015. But in no way is this a sign of weakening. Some 64 metros among the Axio Top 120 recorded occupancy of 95.0% or higher – the point at which Axiometrics considers a property or market full – in October 2016.

The U.S. Census Bureau provided some optimism for the future when it reported the multifamily construction starts for the 12 months ending in September were 42.5% less than the previous 12 months. Analysts expected a decrease, but not to that extent. Though 2017 is still expected to be the peak year for apartment construction in this cycle, fewer starts now could signify a drop in supply for 2018 – decreasing supply and possibly fostering higher occupancy and rent growth.

Of course, that could change. The Census also reported a 17.2% increase in multifamily building permits issued for the 12 months ending in September.

Vegas Rises to No. 3

Las Vegas’ apartment market was late in emerging from the Great Recession. Its economy is highly dependent on tourism and conventions, and it took a while for people affected by the recession to regain the disposable income to travel. The city is also growing as a business hub.

That growth has lifted Las Vegas to third place among the Axio Top 50 for annual effective rent growth, behind Sacramento and Riverside, which held the top two spots for the third straight month.

Memphis took a big leap to No. 7 from No. 12 in September, while Charleston leapt four spots to No. 11. Charlotte replaced Nashville on the list of the 17 markets with the highest rent growth.


Jay Denton

Jay Denton

SVP Analytics

Jay Denton leads Axiometrics’ analytics team of economists and researchers. Denton’s many accomplishments, combined with a devotion to cutting-edge data, have been invaluable in his direction of Axiometrics’ research and analytics development platform.

Denton and his team provide incisive statistics and exceptional analytics that assists clients in making productive and profitable investment decisions when it comes to buying, selling, building and owning apartment and student housing properties.

As one of Axiometrics’ pioneers, Denton helped grow the company into a nationally recognized market research firm known for its trusted and unspoiled apartment market and student housing solutions. Throughout his tenure, Denton has introduced and perfected state-of-the-art research methodologies, processes, products and scheduling to help ensure the quality, consistency and timeliness of the information collected. Much of Denton’s innovations became the gold standard by which other companies endeavored to duplicate.

Denton works closely with Axiometrics clients—ranging from REITs, to large owners and operators, to high net-worth syndicates—on areas including acquisition and development studies, supply and demand forecasts and market selection.

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