Occupancy continues to tighten and rent growth
continues to accelerate despite the introduction of more supply
New apartments are coming on stream across the U.S. at the
highest levels seen in more than a decade, according to MPF
Research, an industry-leading market intelligence division of
RealPage, Inc. (NASDAQ: RP). Properties finished in the nation’s
100 largest metros during the third quarter of 2014 totaled 66,813
units, the biggest block of new supply introduced during a
three-month period since late 2000. The annual completion pace
stood at 226,615 units at the end of September, likewise hitting a
total last seen in late 2000.
The new product delivery pace will accelerate even further
during the next few months. Properties totaling another 90,078
units are scheduled to wrap up construction during the fourth
quarter of 2014, bringing completions targeted during the calendar
year to 257,767 units.
MPF Research analysts highlight the nation’s latest apartment
completion statistics, as well as other key performance indicators
for rental housing in a discussion found at
www.realpage.com/MPFq3-2014-Report.
“The wave of new supply coming for the past year or two now is
beginning to crest,” according to MPF Research vice president Greg
Willett. “The timing looks right for this cycle, as the job
production needed to stimulate household formation also has gained
some momentum this year.”
Continuing the pattern seen for the past few years, demand for
apartments is surpassing delivery volumes, even as those completion
tallies climb. Demand numbers registered at 78,571 units in the
third quarter and 254,993 units in the year-ending in
September.
“There’s a strong appetite for rental units,” Willett said.
“While the economy isn’t performing at ideal levels, there’s enough
momentum to stimulate significant growth of renter households. The
overall performance numbers in the apartment sector are also being
helped by the limited number of first-time homebuyers. Loss of
apartment residents to purchase remains at a trickle.”
Apartment occupancy across the nation’s 100 largest markets
registered at 95.7 percent as of the third quarter. Occupancy
improved from 95.6 percent as of the second quarter and from 95.4
percent as of 2013’s third quarter.
The apartment rent growth pace is accelerating during 2014, and
the trend continued in the third quarter. Effective rents for new
leases jumped 1.3 percent during the quarter, taking the annual
rent growth pace to 3.7 percent.
The San Francisco Bay Area and Denver remain the country’s rent
growth leaders, maintaining the positions seen over the past couple
of years. Effective rents for new leases are climbing at annual
rates of 9.1 percent in Oakland, 9 percent in Denver-Boulder and
San Jose, and 7.4 percent in San Francisco.
At the next tier of performance, annual effective rent growth is
coming in at 6.4 percent in Atlanta, 6 percent in Seattle, 5.8
percent in Portland and Sacramento, and 5.3 percent in West Palm
Beach.
Completing the list of annual rent growth leaders among the
country’s big markets are Houston and Las Vegas, each realizing 4.6
percent pricing increases.
“Las Vegas is a newcomer to the list of rent growth leaders,”
Willett said. “The performance seen over the last couple of
quarters is a dramatic shift from earlier results, since Las Vegas
previously was one of the country’s laggards for rent growth. Job
production and apartment occupancy now are improving rapidly in Las
Vegas, and pricing power is returning in the apartment sector. In
the big picture, however, this one still has some work to do. It’s
the only big market in the nation where today’s rents still trail
pre-recession prices.”
Annual Rent Growth Leaders
Year-Ending Q3 2014
Rank
Metro
Annual Rent Growth
1 Oakland 9.1% 2 (tie) Denver-Boulder 9.0% 2 (tie) San Jose 9.0% 4
San Francisco 7.4% 5 Atlanta 6.4% 6 Seattle-Tacoma 6.0% 7 (tie)
Portland 5.8% 7 (tie) Sacramento 5.8% 9 West Palm Beach 5.3% 10
(tie) Houston 4.6% 10 (tie) Las Vegas 4.6%
A couple of metros where apartment investors deployed sizable
blocks of capital fell to the bottom of the list for rent change.
Washington DC, which is now dealing with record numbers of new
apartments coming on stream, is experiencing minor rent cuts.
Effective rents for new leases dipped 0.1 percent during the year
ending in third quarter. Pricing also is essentially flat in New
York, where rents are inching up just 0.1 percent on an annual
basis.
Ongoing apartment construction in the nation’s 100 largest
apartment markets registered at 387,397 units at the end of the
third quarter. Ongoing building activity has been holding fairly
steady at some 350,000 to 400,000 units since early 2013. However,
that figure could come down quickly during the next few months, if
the large block of new supply scheduled to finish during the fourth
quarter actually gets completed as targeted.
“Look for a minor bump in the road in the apartment market’s
performance right at the end of the year, given so much new supply
will be added during a period when demand is seasonally weak,”
according to Willett. “However, completions in 2015 should return
to a level in line with 2013’s deliveries, allowing performance
momentum to return quickly.”
“There’s about to be a brief window when renters looking for
comparative bargains have a good chance of finding them, but that
opportunity won’t last long,” Willett said.
For more information on apartment market trends, visit:
www.realpage.com/mpf-research.
About RealPage
RealPage, Inc. is a leading provider of comprehensive property
management software solutions for the multifamily, commercial,
single-family and vacation rental housing industries. These
solutions help property owners increase efficiency, decrease
expenses, enhance the resident experience and generate more
revenue. Using its innovative SaaS platform, RealPage’s on-demand
software enables easy system integration and streamlines online
property management. Its product line covers the full spectrum of
property management solutions, including leasing, accounting,
revenue management, marketing solutions, resident services, renter
insurance, utility management, spend management and apartment
market research. Founded in 1998 and headquartered in Carrollton,
Texas, RealPage currently serves over 9,200 clients worldwide from
offices in North America, Europe and Asia. For more information
about the company, visit www.realpage.com.
Photos/Multimedia Gallery Available:
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RealPage, Inc.MediaSarah Marshall,
972-820-3111sarah.marshall@realpage.comorInvestor RelationsRhett
Butler, 972-820-3773rhett.butler@realpage.com
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