NAA’s 2014 Survey of Operating Income and Expenses Executive Summary

NAA has released the executive summary of its 2014 Survey of Operating Income and Expenses in Rental Apartment Communities. The full report will be available by October 1, 2014, but in the meantime there are some interesting tidbits in the summary:

Calendar year 2014 will likely go down as the formal beginning of the shift to a renter-based society. Finding jobs is more important than where to live. Achieving financial stability is taking precedent over residential lifestyle choices. Renting is now perceived as a first, not optional, choice. 

In 2014, the seasonally-adjusted number of multifamily permits will range from 350,000 to 365,000. Multifamily starts should remain around 300,000. Completions will hover around the 230,000 to 240,000 level on a seasonally-adjusted basis. The number of permits, starts and completions will exceed 2013 totals. Demand for rental living will remain strong as more Americans are expected to rent in 2014. Investor interest in urban, micro-units and senior-living apartments is expected to increase in 2014.

Rents in 2014 are expected to range from a 3.1 percent to 3.2 percent increase nationally, which will again be higher than the rate of inflation. The demand for rental apartments is directly tied to the number of jobs being created. As the U.S. economy continues its slow recovery, the pent-up demand will continue to increase. Ironically, the rapid rise in apartment rents is in contrast to the much slower increase in median household income (today around $53,000, or about 3.8 percent higher than at the recession low point reached in August 2011)…

The 2014-2015 outlook for owners and operators of apartment properties is very positive.

In 2014 and beyond, the apartment industry will continue to attract investor interest in both primary, secondary and, in some cases, tertiary markets and among all rental property types. As the U.S. continues its gradual shift to a more rental-based soci-ety, the demand for apartment units will continue to increase. However, the looming impact of rising construction costs, poten-tial interest rate increases, flat household income growth and a rising number of part-time employees will put pressure on rents. The shift to smaller units, demand for more urban/mixed-use properties in employment growth markets, and increasing resi-dent demands and expectations for more—not fewer—services will continue to challenge CEOs and leadership teams through-out the apartment industry. In addition, the impact of technol-ogy on how apartments are operated, sold and maintained will continue to require apartment owners and operators to bring their “A Game” each and every day of the year…

The apartment industry is in great shape; however, during the next five to seven years, there will likely be further consolidation, legacy exits, and the emergence of new and dynamic competi-tors. Achieving success tomorrow requires one to take care of business today. While the outlook remains very positive for apart-ment owners and operators, the next two to three years is the time to set the stage for some likely challenges ahead. 

Below is one of the charts from the summary (click to enlarge). For the full summary click here.