Despite the economic turbulence, the apartment market kept growing in August and September, according to information released from the major industry data providers, but things did slow from the frenzied increases of earlier this year.
Dallas-based Axiometrics reported in late September that effective-rent growth (rent net of concessions) slowed somewhat during August, to a rate of 0.34 percent. That was the lowest rate of growth since December 2010, but rent growth is still set to be higher than the strong 2010 numbers. Occupancy also moved up, hitting 94.09 percent, up from 93.92 percent in July. Thirty-five of the top 88 markets had occupancy rates above 95 percent.
“We’re still showing a very strong apartment market,” says Jay Denton, vice president of research at Axiometrics. “We’re about to start seeing a normal seasonal pattern of growth rates slowing in the third quarter. We haven’t seen a big hit on the industry.”
Sausalito, Calif.–based RealFacts reported that rents have finally been restored to where they were in 2008, moving to $994 a month with 93.4 percent occupancy. Of the 47 markets published, 38 posted gains and 33 showed an increase in third-quarter occupancy.
New York–based Reis saw vacancies fall 30 basis points, from 5.9 to 5.6 percent, as 36,000 apartments were absorbed. In the second quarter, 42,000 units were absorbed. Vacancies are now at 2006 levels, according to the research firm, but there is some caution.
“The fact that we kind of saw a little bit of slowdown relative to earlier in the year leads me to believe that some people are cautious about renting,” says Ryan Severino, an economist at Reis. “We didn’t see vacancy declines or rental increases the way we might have expected. Consumer sentiment really crashed in August. We’ve come back up a little bit, but it hasn’t been a spike back up.”
But Severino remains optimistic about 2012 and beyond, with asking rents up 0.6 percent and effective-rent increases at 0.7 percent. “The vacancy rates have gotten so tight it’s become a favorable environment for landlords to push rent increases to tenants,” he says. “If you run that rate out, we're getting into 2.5 to 3 percent range. Next year, we’ll start to break above that and start to see indications of rent acceleration.”
Carrollton, Texas–based MPF Research has occupancy at 94.8 percent overall, which is higher than the average occupancy over the past decade. The occupancy number jumped one point year over year and 0.6 of a point over the past quarter. MPF says rents grew 4.2 percent between the third quarter of 2010 and the third quarter of 2011.
“You don’t have to put quantifiers on it, saying it was good relative to expectations or OK given what was going on in the economy. It was just flat-out strong numbers,” said Greg Willett, who heads the research and analysis team at MPF, in the company’s quarterly “Apartment Market Dynamics” video at propertymanagementinsider.com.
Willett said the fact that rents continued to move was a good sign for the business. Effective rents for new leases went up 1.6 percent in the quarter. Year-over-year effective-rent growth jumped 4.2 percent, which was the same mark posted in the first six months of 2006.
Ron Johnsey, president of Axiometrics, says it’s going to take more than stock market uncertainty to change his forecast. “I would change the forecast if I felt like job growth was going to turn negative,” he says. “If, at the national level, we lost 50,000 to 100,000 jobs, things would really change. But the main thing is, we have such low supply at this point in time.”