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.
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.
According to a brief published by CBRE and referenced in an article in MultiFamily Executive, national turnover rates for multifamily housing are at their lowest level in the past 20 years. From the article:
A recent brief published by CBRE shows the turnover rate for multifamily housing has fallen to 47.5%, which is the lowest level in two decades. CBRE quotes numbers from RealPage that show a drop of 80 basis points. The decline is confirmed by additional evidence culled from six major real estate investment trusts (REITs). AvalonBay, Camden, Equity Residential (EQR), MAA, and UDR all show a lower turnover rate in Q1 2019 as compared with 2018 with an annual average drop of 2% to 42%. Essex showed a 1-point rise to 41%.
The drop represents an overall trend that has been happening since at least 2000, when the rate was clocked at 65%. According to CBRE, “lower turnover rates are generally interpreted as positives for the industry and a sign of favorable market strength at this point in the cycle.” Turnover ticked up a bit in the mid-2000s but then tumbled again during the Great Recession.
The lowest turnover rates were in the Northeast and Midwest, while the rates in the South and West were higher. Also, rates of turnover were lower in Class B and C properties than in Class A properties.
Yardi released its June Yardi Matrix Multifamily Report, its monthly summary of rental market conditions throughout the US, and found that the Triad’s rent growth is among the ten highest in smaller US metro markets. As you can see in the table below the Triad’s overall rent growth over the last year was 4.8%; “Lifestyle” rents increased by 6.2% and the “Renter-by-Necessity” sector of the market increased by 3.7%
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.
RealPage released its rent report for the first quarter of 2019 which showed that the Triad had the fourth highest increase in the country. From an article in the Triad Business Journal:
Rent prices in the Greensboro/Winston-Salem metro area saw a 5.2 percent increase in the first quarter, with an average rent price of $830.
Greensboro/Winston-Salem ranked No. 4 in rent price increase among large metros, according to a first quarter apartment market report by RealPage Inc. (NASDAQ: RP). Phoenix, Arizona (up 8 percent), nabbed the top spot, followed by Las Vegas, Nevada (up 7.9 percent), and Atlanta, Georgia (up 5.3 percent). Charlotte ranked No. 11, with a 4 percent increase in rent prices.
Greensboro/Winston-Salem outpaced the national average, with U.S. apartment rents increasing by about 3.2 percent on an annual basis.
According to a report released by Zumper, rents in Greensboro and Winston-Salem were among the lowest in the 100 markets they surveyed. From an article in the Triad Business Journal:
Of 100 U.S. cities surveyed, Greensboro was No. 88 with average monthly rent of $720 for one-bedroom unit ($820 for two bedrooms). The prices reflected a 5.9 percent yearly increase for one bedroom and a 3.8 percent jump for two bedrooms.
Winston-Salem, which was No. 78 on the list at $780 ($840 for two bedrooms), has experienced a larger spike in rent prices, with increases of 9.9 percent and 10.5 percent, respectively…
Charlotte ($1,160 and $1,310) ranked No. 33; Durham ($1,110 and $1,270) was No. 43; and Raleigh ($1,000 and $1,150) was No. 48.
According to this article in the Wall Street Journal, industry analysts expect slower rent growth for apartments across the US in 2019. A key factor is that more units are expected to come online this year than we’ve seen in any year for three decades. From the article:
Developers are slated to complete another 319,000 new units in 2019, up from last year’s still-aggressive figure of 287,000 units. That is the largest influx of new apartment supply in roughly three decades.
Filling those units could be particularly challenging if the economy begins to slow as expected.
“We certainly saw we can handle that [much supply] as long as the economy is producing 200,000 jobs a month, but that’s realistically not the expectation for next year,” said Greg Willett, RealPage’s chief economist.
As has been true for the last ten years, the pace of construction in the Piedmont Triad has lagged that of most of the country, including our neighbors in Raleigh and Charlotte, so this market may not see the same slow down that’s anticipated for other markets.