Why Piedmont Triad Apartment Rents Aren’t As High As Might Be Expected

By now most of us have heard about how the demographic changes we’re experiencing are (generally positively) impacting the apartment market, but some new data shows that when you dig into the numbers there’s more nuance than you might have otherwise expected to find. From an article on the National Real Estate Investor site:

One of the more interesting findings in this expansion can be found in the demographic statistics. Data on households shows that non-family households have grown at a disproportionately faster rate than family households. Non-family households include singles, roommates and any kind of cohabitation arrangement that does not include marriage or children. The graph below clearly shows that this divergence started when the housing market collapsed, but it continued throughout the subsequent eight years. This chart illustrates the common notion that Millennials have put off starting a family and buying a home. It also explains why the apartment market has thrived over the last 10 years, expanding by 12 percent from 2007 to 2016.

Looking at the metros shows a somewhat consistent pattern: those with the highest non-family household growth had some of the highest occupancy growth rates. These include Austin, Greensboro/Winston-Salem, N.C., Houston, San Antonio and Charlotte, N.C. Apartment occupancy in these metros grew by 20 percent or more from 2007 through 2015. However, these metros saw high overall growth rates in population and households as well, so occupancy growth was not necessarily driven by the non-family household growth trend.

The question that then emerges is: do metros that have disproportionately higher growth in non-family households show strong rent and/or occupancy growth patterns? The data suggests that the answer to this question is no. The two North Carolina metros—Charlotte and Greensboro/Winston-Salem—both have disproportionately higher non-family household growth than family household growth rates, as well as high occupancy growth. Charlotte’s rent growth was just above the U.S. average, but Greensboro’s rent growth is below the U.S. average rate. Moreover, other metros with wide gaps between non-family household and family household growth rates include Birmingham, Ala., New Haven, Conn., New Orleans, Wichita, Wis. and Richmond, Va.—none of which have posted strong apartment rent growth rates…

Thus, one could conclude that rents are driven more by economics—job and income growth—than demographics, which still drives occupancy. In short, the demographic shift that we have seen these last few years—fewer families and more “non-families” has changed the urban landscape dramatically. Nevertheless, the property markets are still ruled by economics, which may or may not move in step with the demographic changes.

What they’re saying in a nutshell is that the apartment market here in the Triad has a strong occupancy rate due to demographics (growth in households) but rents are suppressed due to economics (our local job and income growth is weak). Bottom line? Until we have more and better paying jobs here in the Triad our rents will remain low relative to the rest of the country.