Three months in, it seems like peak leasing season has gotten off to a good start for landlords across the country, and the cries of doom and gloom for 2015 have abated.
In data released yesterday, MPF Research reports that rental rates jumped 6.5% in May, which breaks the previous April high for this cycle.
April and May are usually key months because more leases are in play. Property managers usually schedule their leases to expire in the spring and summer months with expirations rising in July and August.
“The May numbers mark three straight months of better-than-expected rent growth to start 2015’s peak leasing season,” said Jay Parsons, director of Analytics at MPF Research in a statement. “The results have been especially impressive given widespread industry expectations of slowed rent growth in 2015 due to increased new supply and affordability barriers, among other factors.”
Despite increasing supply and rising rents, the growth came from both new residents, up 8.4%, and renewals, up 5.1%. MPF’s rent growth numbers are based on lease-over-lease change. Surprisingly (with new construction coming online), average occupancy for stabilized properties (which excludes lease-ups) tightened to 95.7%.
“Apartment construction is at 25-year highs, and you’d expect to see retention rates fall as renters move up to new apartments – which would then trigger diminished rent growth,” Parsons said. “But that’s not happening, at least not yet.
Demand continues to keep pace with supply in most markets. That’s helping keep vacancy rates low, retention high and rent growth elevated.”
The statistics come directly from a subset of the nearly 10 million units available to MPF Research, as a division of the RealPage platform. Apartments in the dataset are professionally managed and tend to be of institutional quality.
One of the big themes of the May numbers was a 51.2% renewal retention. MPF says this is not only the 25th straight month of a rising renewal retention rate, but a 40 basis point year-over-year increase.