More than 2,600 professional rental communities comprising about 699,000 units across the country have been successful at raising net operating income (NOI) over the past three years. But the total capture of gross potential rents at those communities decreased slightly in 2007. Those are the latest figures according to the “2008 Survey of Operating Income and Expenses in Rental Apartment Properties,” conducted by Los Angeles-based CEL & Associates and sponsored by the National Apartment Association (NAA).
NAA's survey of 3,691 properties revealed that garden apartments that were individually metered for utilities (the survey's largest respondent demographic at 2,611 communities) drove average NOI to $6,011 per unit last year, compared to $5,644 per unit in 2006 and $5,098 in 2005.
NOI as a portion of gross potential rent among individually metered garden apartments dropped slightly to 56.6 percent, compared to 56.9 percent in 2006. Salaries were the largest line item cutting into NOI, accounting for an average of $1,071 per unit against the bottom line last year. Taxes also impacted operating income, with an average of $1,012 levied per unit in 2007. At 2.6 percent of gross potential rent, losses to concessions were highest in the individually metered garden apartment sector, compared to 2.2 percent in the individually metered mid-rises and high-rises; master-metered garden apartment; and master-metered mid-rise and high-rise product categories.
In an executive summary of the survey, CEL & Associates president and CEO Christopher Lee writes that NOI losses against gross potential rent reflect uncertainties in the economy, but otherwise positive operating fundamentals illustrate a healthy industry.
“During a time of rental housing supply/demand imbalance in many markets, the turmoil created by the collapse of the subprime loan industry, anemic job growth, and rising energy and day-to-day living expenses, the apartment industry has responded in a proactive and professional manner,” he wrote. “Within the apartment industry, the experience, knowledge, and dedication to on-site personnel are paying big dividends for residents and owners alike.”