Piedmont Triad in Top 5 Rent Growth Markets

According to this piece on NAA’s website, the Piedmont Triad’s annual rent growth in July was in the top five in the country:

The leaderboard of rent growth leaders shuffled slightly, but the markets remained about the same. Las Vegas took the top spot for annual rent growth in July at 8.4%. Phoenix (8.3%), Sacramento (5.2%), Raleigh/Durham (5.1%) and Greensboro/Winston-Salem (5.0%) rounded out the top five. Austin, Nashville, Riverside, Charlotte, Atlanta, Milwaukee and Cincinnati all saw between 4.0% and 4.8% annual rent growth.

The article also points out that national occupancy rates hit 96.2% in July, the highest they’ve been in 20 years:

Strong leasing activity in this year’s peak season has continued to cause apartment vacancies to drop, with July’s occupancy rate reaching 96.2 percent. That rate, the highest rate since 2000, was up 0.4 points year-over-year.

As usual, occupancy was tightest in the Northeast region, at 97 percent. The West and Midwest were 96.5 percent and 96.4 percent occupied, respectively. Occupancy landed at 95.7 percent in the South. Those rates were up 0.2 points to 0.5 points from a year ago.

Of the nation’s 150 largest apartment markets, 91 meet or exceed the national norm for occupancy and 135 hit the effectively full mark of 95 percent. Only four markets register occupancy below 94 percent, including some supply challenged Texas markets like College Station and Lubbock.

Multifamily 2019 Midyear Outlook from Freddie Mac

Freddie Mac Multifamily released its 2019 Midyear Outlook and it must be said that their outlook is rosy. From the article posted on their website:

In our research, we find that strong economic growth and the robust labor market continue to support the strength in the multifamily market. Last year ended much stronger than anticipated with near record absorptions and stronger rent growth compared with the prior few years. The first two quarters of 2019 saw mixed results, with slower growth in the first quarter but preliminary second quarter information indicating the spring leasing season is off to a strong start. Along with the strong fundamentals, lower interest rates continue to drive origination volume higher throughout 2019...

We continue to see an overall shortage in housing as household demand outpaces new supply. The U.S. Census Bureau reports five-plus unit multifamily completions are on pace in 2019 to exceed the previous few years. However, total housing completions over the past three years have averaged 1.1 million housing units each year, while the number of households have increased on average 1.4 million each year. The continued increase in multifamily construction when the overall housing market continues to remain unbalanced is not necessarily an oversupply concern as the economy struggles to build enough housing. ..

The multifamily market is expected to remain healthy for the rest of 2019 and into 2020. We expect demand to remain robust and continue to entice construction of multifamily units. New supply is scheduled to remain elevated for the next few years. As this supply enters the market, we expect vacancy rates to increase throughout the year, but only marginally, up to 5.2%. We anticipate that rent growth will remain healthy at around 4% in 2019.

For more information and analysis, please read our full report. pdf

Rents Up, Vacancy Down in Piedmont Triad Apartment Market

Real Data just released their March, 2019 survey report for the Piedmont Triad and the results show that the apartment market continues to be very strong here in the Piedmont Triad. They report that the average vacancy rate is 3.7%, down from 5.5% in March of 2018, and average rent is $898 ($0.943/SF) versus $842 ($0.888) this time last year. From their market summary:

The Triad apartment market continues to tighten with an average vacancy rate at just 3.7%. Over the last year demand has been strong with 2,595 units absorbed, easily offsetting the 1,487 units added to the supply over the same time period.

The development pipeline included 2,081 units under construction and another 4,462 units proposed. Guilford County is the most active with 1,183 units under construction and an average vacancy rate at 3.3%.

The region has posted strong rent growth of 4.5% over the past twelve months…

With demand expected to remain strong, the average vacancy rate should hold close to 4.0% over the next year. Rents will continue to grow an an annual rate of 4% to 4.5%.

You can buy a copy of Real Data’s full report here.

Piedmont Triad Apartment Market Remains Hot – Where is it Hottest?

Real Data’s October survey results show that the apartment market remains very strong in the Piedmont Triad. Their market summary says it best:

The Triad apartment market is tightening with an average vacancy rate at just 4.0%. Over the last year demand has been strong with 2,348 units absorbed, easily offsetting the 1,595 units added to the supply over the same time period.

The development pipeline includes 2,814 units under construction and another 2,141 units proposed…

The region has posted strong rent growth of 3.8% over the past twelve months. The average rental rate is now $876 per month, as compared to $832 just twelve months ago. One bedroom units average $769, two bedrooms rent for an average of $869 and three bedrooms rent at $1,093 on average.

The report also indicates that the average vacancy rate should hold close to 4.0% for the next year and rents will continue to grow at a yearly rate of 3.5-4.5%.

Source: AptIndex.com

So which submarkets are the hottest in the Triad?

  • Occupancy – Guilford Northeast (97.5%)
  • Average Rent – Guilford Central ($1,091)
  • Average Rent per SF – Forsyth Central ($1.172)
  • Units Under Construction – Forsyth Central (573)

To get a full copy of the Real Data October, 2018 report go to aptindex.com.

US Apartment Rents and Occupancy Up in Third Quarter

Across the U.S. rent and occupancy rates rose in the third quarter, although not at the same rate they were rising a few years back. From the Wall Street Journal:

Apartment rents rose 2.9% in the third quarter from a year earlier, up from 2.5% annual rent growth in the second quarter, according to real estate analytics firm RealPage Inc. A strong economy with better wage growth helped boost demand for apartments. So did a weak home-sales market, as tight supply may have prompted more renters to put off buying.

Source: Wall Street Journal

“There definitely doesn’t seem to be the pressure to buy that was there a little bit earlier,” said Greg Willett, chief economist at RealPage.

The rental market has still slowed significantly from a few years ago, when rents grew by 5.2% in the third quarter of 2015. But Mr. Willet said that “an upward blip rather than a downward blip” shows at least that the slowdown isn’t accelerating.

The share of occupied apartments during the third quarter rose to 95.8% in the third quarter from 95.4% in the second quarter, according to RealPage.

Interestingly, one factor that might be contributing to the stronger than anticipated rental market is the tax cut passed last year:

Barbara Byrne Denham, a senior economist at Reis, attributed stabilization in the rental market to the tax bill that passed last December. That bill almost doubled the standard deduction for individual and joint filers, making it less advantageous for most homeowners to itemize and take the mortgage interest deduction.

Wall Street Journal: It’s a Great Time to Rent (In Major Metros)

An article in the Wall Street Journal might come as a surprise to those of us who have been addressing the issue of housing affordability. The article cites the following:

It is a great time for anyone looking to rent an apartment: vacancy rates are rising and there are little or no rent increases in many major cities.

For landlords, though, the U.S. apartment market suffered its worst spring since 2010, near the depths of the housing crisis. Driving this dynamic is a flood of new apartments and weakening demand.

Rents rose 2.3% in the second quarter compared with a year earlier, the smallest annual increase since the third quarter of 2010, according to data from RealPage Inc. scheduled to be released on Wednesday. Rental growth was flat in major cities with otherwise strong economies—such as Austin, Portland, Seattle, Dallas and Washington, D.C.—due to large amounts of new supply…

Landlords have enjoyed a record 32 straight quarters of annual rent growth on average, as the U.S. economy strengthened and millennials delayed homeownership. But the reports of slowing, which began in a few markets in late 2016, have intensified to the point that the balance is shifting towards renters and away from landlords…

Data released Tuesday from another apartment data provider, Reis Inc. also showed a largely weak rental market across the country in the second quarter. The national vacancy rate ticked up to 4.8% from 4.3% in the second quarter of 2017. The number of additional units that were rented fell to just over 37,000 from nearly 53,000 a year earlier, suggesting demand was weaker.

But it’s not all doom and gloom:

Despite the recent slowdown, apartment owners note that the market is far from crashing and rent growth remains just below historic norms.

Little concern has arisen that the softening could have broader economic repercussions for the U.S. financial system.

Here in the Triad we’ve not had the same level of new construction compared to the major metro areas so we don’t expect to see too much of a softening in terms of rent or vacancy. Time will tell, of course, but this might be one of those times when being the tortoise in the race is a good thing.

Triad’s Average Rent Growth is Strong According to Real Data

Real Data’s April ‘18 report for the Triad shows that occupancy is down a tad is better than it was a year ago, although down a tad in the last six months, while rents rose quickly in the last year.  Their data shows that vacancies have risen from 5.2% to 5.5% since October ’17, but are still below the 6% reported one year ago. Average rents are up 4.2% over the last year, with the average rental rate now at $842 vs $794 a year ago.

Drilling down, the data shows that:

  • 1BR Units Average Rent = $741
  • 2BR Units Average Rent = $837
  • 3BR Units Average Rent = $1,039
  • Guilford-Central submarket has highest avg rent: $1,080
  • Forsyth-Central submarket has highest avg rent per SF: $1.107
  • Guilford-South submarket has lowest vacancy rate: 3.9%
  • Guilford-Northeast submarket has highest vacancy rate: 9.5%

Real Data’s forecast for the next year is that vacancy rates should remain below 6% and rents should continue to grow at a 4-5% annual rate.

To purchase a full report, including stats for individual apartment communities, visit www.aptindex.com

Market Softens Less Than Expected

According to REIS the vacancy rate nationwide scootched up a tad in the first quarter of 2018, but so did rents. All in all the market has cooled, but not as much as some analysts feared due to the boom in construction. From the Wall Street Journal:

The apartment vacancy rate edged up to 4.7% in the first quarter, up from 4.6% in the fourth quarter of 2017, according to data released by Reis Inc. on Tuesday. The vacancy rate jumped from 4.3% a year earlier, while the average apartment rent grew 3.9%, Reis said.

By both measures, the market has cooled from the recent peak, when rent growth hit 5.8% in 2015 and the vacancy rate touched a low of 4.1% in the third quarter of 2016.

Still, the market has proved to be resilient, given a flood of new supply from developers hoping to cash in from the strong growth rate earlier in the recovery. A sharp slowdown in occupancy and rent growth hasn’t materialized…

Nearly 59,000 units per quarter were added in 2017, compared to the historical average of around 34,000 units per quarter.

The author of the article also points out that the new tax law, which reduced the tax benefit of owning versus renting, might have reduced the number of people actively pursuing homeownership.

What We Learned at PTAA’s 2017 Industry Forecast Breakfast

PTAA’s 2017 Industry Forecast Breakfast, held November 28 at Revolution Mill in Greensboro, featured a panel of three speakers: Mark Vitner, Managing Director & Senior Economist at Wells Fargo; Brian Ford, Managing Partner at Capstone Apartment Partners; Colin Wolfe, President of Real Catalyst Group. Vitner provided a regional and national economic update and forecast; Ford addressed the Triad apartment market from a transactional standpoint; Wolfe reviewed the PTAA Supply and Demand Dashboard that he developed in 2017.

Some key takeaways included:

Vitner (National and Regional)

  • Greensboro apartment activity has slowed in 2017 after the highest amount of absorption on record to close 2016. As a result of slower supply growth, rents have increased each quarter this year.
  • North Carolina continues to see solid economic gains across most major metro areas.
  • Pace of job growth in the Triad trails that of the state.

Ford (Piedmont Triad Apartment Transaction Outlook)

  • 52% of Triad Multi-Family Owners are based outside of NC.
  • Since 2016, 78% of buyers in the Triad are new to the area.
  • Number of transactions this year in the Triad is 31 YTD. In all of 2016 there was 54.
  • Triad had almost as many transactions in 2016 (54) as the Triangle (58) did.
  • Cap Rates in the Triad are on average 0.5%+ higher compared to Charlotte and Raleigh MSAs, thus providing for higher returns for investors.

Wolfe (Triad Supply and Demand Dashboard)

  • Completions and Demand in the Triad have been largely balanced over the last four years.
  • Completions as a percentage of overall apartment stock in the Triad has been about the same as the national average over the last four years (1.5% to 2.6%) while Raleigh has ranged from 3.4% to 5% and Charlotte has been in the 4.2%-5.1% range.

Following their presentations, the panelists took questions from the audience for 30 minutes, and the conversation was lively and informative. One fun takeaway from that discussion: Vitner is of the opinion that Charlotte and Atlanta are frontrunners for Amazon’s second HQ.

For more information about the session please contact Jon Lowder.

Rents Up, Vacancies Down in Piedmont Triad Apartment Market

Real Data’s October, 2017 market report for the Piedmont Triad was just published and the trends look good. Here are the highlights:

  • Vacancy rate: 5.2% (was 5.6% in October, 2016)
  • Average rent/SF: $0.876 (was $0.843 in October, 2016)
  • # of units: 67,560 (was 64,196 in October, 2016)
  • 1,814 units have been absorbed in the last year
  • 2,646 units are under construction, and another 1,870 are proposed

Real Data expects vacancies to remain around 5.0% over the next year.

Also of interest is how the various submarkets are performing. Most notable:

  • Highest rent per SF: Guilford-Central ($1.131) and Forsyth-Central ($1.056)
  • Lowest vacancy rate: Guilford-High Point (3.3%)
  • Highest vacancy rate: Guilford-Southwest (7.8%)
  • Most units under construction, as a percentage of all units surveyed: Alamance-Burlington (10.79%)

To get a full copy of Real Data’s Triad market report visit www.aptindex.com