More than half of all renters with expiring leases decided to renew in August. And, when they did, they paid, on average, a 5.4% increase in monthly rent, according to an MPF Research analysis of lease transaction data from Carrollton, Texas-based parent company RealPage.
In all, 51.1% of the nation’s apartment renters whose leases were set to expire in August 2015 chose to renew, which was up 0.3 percentage points from August 2014. MPF says that was the largest increase for lease renewals in nearly 10 years.
“Renters are increasingly choosing to stay put and renew their leases in spite of rapidly rising rents and historically large levels of new supply, which logic would suggest would be driving down retention,” said Jay Parsons, director of analytics for MPF Research said in release announcing the results. “And the fact that retention is still so strong speaks to the depth of demand for apartments and to the absence of any sort of affordability crisis in conventional, investment-grade apartments.”
Prior to 2010, renewals mainly stayed in the mid- to upper-40s. But now the industry is on a 20-month streak of more than 50% of renters renewing. But not everyone is seeing this.
“We have seen resident retention at lower than historical levels for the last couple of years, which I am guessing is a function of record-high occupancies across the country,” says Bobby Lee, president and COO of Los Angeles–based JRK Property Holdings.
MPF said retention rates in all regions were above 50% in August, with the Northeast and Midwest claiming most of the major U.S. metro areas with the highest retention rates last month. For apartment owners with large portfolios, the swings could be dramatic by market.
“Overall turnover is in line this quarter with last year at the same time, but in several markets turnover is significantly lower than last year,” says Cristina Sullivan, an executive vice president at Gables Residential. “There are some big swings both ways. It just depends on the market. Although some markets/submarkets are working thru short term supply issues, overall the apartment market is benefiting from strong overall economic fundamentals.”
MPF said that higher turnover occurred in South and West region metros. “These are generally younger markets with stronger job growth of late,” Parsons said in the release. “And younger population plus more job growth tends to equal more mobility, which in turn means higher turnover or lower retention.”
