After months of struggling to fill units, apartment firms are finally starting to see a slow-but-steady uptick in occupancies. REITs are leading the charge as they’ve typically been more aggressive than their private competitors at reducing rents to protect occupancy through revenue management software.
Case in point: Occupancy levels throughout Memphis, Tenn.-based Mid-America Apartment Communities’ portfolio hit a new second-quarter record: Occupancy was at 95.6 percent, compared to 95 percent last year.
“The markets that gained the most [occupancy] sequentially were the Florida markets, Jacksonville in particular; places like Houston, which closed solidly at 94.7 percent in occupancy levels; and Austin at 95 percent,” says Thomas Grimes, Mid-America’s executive vice president.
UDR also saw a sizable pop at its properties. The Highlands Ranch, Colo.-based REIT reported a 95.7 percent portfolio-wide occupancy level in the second quarter of 2009, versus 94.8 percent in the second quarter of 2008.
“REITs are better financed than our private peers and because of that, we have been able to continue to invest to make our real estate and properties look better,” says Jerry Davis, senior vice president of operations at UDR.
But UDR, like all companies public and private, has had to sacrifice rents. “Between renewals and new leases, we saw average new rents going down about 4.5 percent,” Davis says.
While smaller, private players may not be achieving occupancies at levels quite as high as the REITs, some are reporting an uptick. RMK Management Co., a Chicago-based firm with 9,000 units in the Midwest, saw a 2 percent occupancy increase in the second quarter of the year, reaching the 93 percent mark portfolio-wide. Concessions in the first quarter were as high as two months of free rent, but the firm is now only giving away a month to a month-and-a-half.