This year’s Spring leasing season was especially kind to apartment owners, according to research firm Axiometrics.
Not only did the sector enjoy 5% annual effective rent growth in the second quarter, which was the highest jump logged in four years, but its 95.2% occupancy has only been seen once since the go-go tech years of 2001.
“We’ve been seeing steady 5% rent growth in our monthly reporting, so the quarterly number is right on track. The second quarter is traditionally strong for growth, as school has ended and weather is warmer,” said Stephanie McCleskey, vice president of research for Axiometrics in a release accompanying the report. “The drivers of the apartment market—job growth, population growth, single-family home affordability and propensity toward renting—are all beneficial to rent and occupancy growth. At this point, affordability could become an issue in some markets, and the high rent-growth levels in other markets are unsustainable.”
Since Axiometrics considers 95% occupancy to basically be the same as a full apartment, new supply might exactly what many markets need. “Occupancy has historically increased in the second quarter,” McCleskey said. “The significance of the 95% milestone is that we consider a market or property functionally full at that level. With record new supply coming to market, the fact that the occupancy rate continues increasing demonstrates the strength of the market.”
Here are some other highlights straight from Axio’s release:
• Average national rent was $1,211 for 2Q15, a $58 increase from the average of $1,153 in 2Q14.
• Annual effective rent growth rate of 5.0% represented a 4-basis-point (bps) increase from the 4.9% reported in 1Q15 and a 142-bps rise from the 3.6% in 2Q14. The figure is the highest since 2Q11, when rent growth was 5.1%.
• Quarter-over-quarter effective rent growth rate of 2.7% showed a healthy increase over the 0.9% reported in 1Q15 and equal to the 2Q14 rate.
• Every metro in Axiometrics’ top 50 had positive quarterly effective rent growth for 2Q15, compared to 36 in 1Q15 and 14 in 4Q14. This is a strong indicator of apartment market strength.
• Occupancy was 95.2% for 2Q15, a 48-bps increase from 94.8% in 1Q15 and an increase from the 94.4% in 2Q14. This past quarter was only the second quarter in which occupancy surpassed 95% since 2001; the other time was 3Q14, when the occupancy rate was 95.1%.
• 62,403 new apartment units were identified to be delivered nationwide during 2Q15, some 22.5% of the total 277,224 units forecast to come to market in 2015. Last year, 217,555 units were delivered.