DALLAS, TX--(Marketwired - May 21, 2013) - Axiometrics Inc., the leading provider of apartment data and research, reports that national effective rent growth in April softened to its slowest pace in the past 32 months, to a rate of 3.11%. While effective rent growth was weaker than in prior periods, the occupancy rate continued to strengthen in April to a national average of 94.60%, and 44 of the top 88 Metropolitan Statistical Areas (MSAs) generated an average occupancy rate above 95.0%. Of note, Axiometrics' pipeline data indicate that starts are leveling off at the national level, though the coming months will tell whether this is a permanent trend.
"While we are nowhere near the apartment market trough seen during 2008 and 2009, there is no doubt that effective rent growth is now slowing in many markets, especially as Class A properties continue to be a drag on rent growth," said Jay Denton, Vice President of Research at Axiometrics. "Rent growth at Class C properties has largely supported the market the past several months, and should continue to do so the rest of this year. The real question is what will happen in terms of supply, though recent indicators are that starts have leveled off somewhat in some areas."
Effective Rent Growth and Occupancy
Nationally, effective rent growth has been moderating since July 2011. Monthly rent growth in April of 3.11% is down more than a full point from a rate of 4.14% in April 2012, and down nearly two-and-a-quarter points from the peak rate of 5.32% in July 2011. Still, 14 of the top 88 MSAs had an annual growth rate greater than 5.0% in April, including Oakland (8.16%), Denver (6.46%), San Jose (5.99%), and Houston (5.84%). Only four MSAs had a negative annual growth rate in April: Tucson (-0.51%), Albuquerque (-0.53%), Mobile (-1.03%), and Little Rock (-1.06%).
In terms of occupancy, the rate increased 16 basis points (bps) in April, from 94.44% in March to 94.60%. This rate is up 28 bps from April 2012 and 70 bps from April 2011. There is typically a fairly rapid increase in occupancy the first two quarters of the year, and this year the national occupancy rate is already hitting the 2012 peak of 94.6% set in September 2012.
By asset class, Class C properties continued to post the strongest annual effective rent and occupancy growth rates in April. While Class A effective rent growth slowed to just 2.80% in April (down from 4.7% in April 2012), Class C properties achieved rent growth of 4.0%. In addition, though at an average rate of 93.2% occupancy for Class C properties is still behind Class A (95.13%) and Class B (94.96%) properties, the absorption rate for Class C remains the strongest.
The following table lists the top 11 ranked MSAs across the country for annual effective rent growth, as well as rankings of other key markets across the country. Of note, Washington, DC, which was one of the strongest MSAs early in the recovery cycle, is now one of the weakest MSAs nationally.
| Top and Bottom Performing MSAs | |||||||
| Rank | MSA | Annual Effective Rent Growth | Occupancy Rate | ||||
| Apr-11 | Apr-12 | Apr-13 | Apr-11 | Apr-12 | Apr-13 | ||
| 1 | Boulder, CO | 11.4% | 5.6% | 11.6% | 97.2% | 96.3% | 96.0% |
| 2 | Oakland, CA | 7.9% | 6.7% | 8.2% | 95.9% | 96.1% | 96.3% |
| 3 | Corpus Christi, TX | 3.7% | 7.1% | 7.7% | 93.6% | 95.9% | 96.2% |
| 4 | Sarasota, FL | 5.9% | 3.8% | 7.2% | 95.5% | 96.1% | 94.6% |
| 5 | Cape Coral, FL | 2.9% | 3.8% | 7.1% | 93.3% | 94.0% | 95.3% |
| 6 | Denver, CO | 6.6% | 6.7% | 6.5% | 95.0% | 95.1% | 95.5% |
| 7 | San Francisco, CA | 10.8% | 13.1% | 6.1% | 96.7% | 96.2% | 95.7% |
| 8 | San Jose, CA | 12.2% | 9.3% | 6.0% | 97.3% | 96.6% | 96.2% |
| 9 | Palm Bay, FL | 2.4% | 2.6% | 5.9% | 89.8% | 91.9% | 94.9% |
| 10 | Houston, TX | 3.6% | 5.9% | 5.8% | 91.3% | 93.1% | 94.2% |
| 11 | Naples, FL | 6.9% | 8.8% | 5.6% | 95.2% | 97.8% | 98.4% |
| National | 5.0% | 4.1% | 3.1% | 94.1% | 94.3% | 94.6% | |
| Some additional MSAs | |||||||
| 16 | Seattle, WA | 8.3% | 5.6% | 4.9% | 95.6% | 95.4% | 95.9% |
| 20 | Charlotte, NC | 4.9% | 7.8% | 4.3% | 93.5% | 94.6% | 95.1% |
| 21 | Austin, TX | 9.1% | 6.9% | 4.2% | 94.9% | 95.0% | 95.1% |
| 36 | Dallas, TX | 6.3% | 6.2% | 3.4% | 93.7% | 94.4% | 94.8% |
| 38 | Atlanta, GA | 3.8% | 3.6% | 3.3% | 92.1% | 92.3% | 93.1% |
| 43 | Orlando, FL | 2.7% | 4.2% | 3.0% | 93.1% | 93.9% | 94.7% |
| 47 | New York, NY | 6.6% | 3.7% | 2.8% | 96.9% | 96.6% | 96.8% |
| 51 | Los Angeles, CA | 2.6% | 4.5% | 2.6% | 94.7% | 95.2% | 95.2% |
| 56 | Boston, MA | 9.2% | 7.4% | 2.2% | 96.5% | 95.8% | 96.0% |
| 71 | Washington, DC | 6.4% | 3.2% | 1.0% | 95.7% | 95.2% | 94.9% |
| National | 5.0% | 4.1% | 3.1% | 94.1% | 94.3% | 94.6% | |
| Source: Axiometrics | |||||||
Apartment Pipeline
Recent Axiometrics surveys of developers across the country indicate that rising construction costs are making it difficult to introduce new projects, particularly in the suburbs, as cost increases are pushing pro forma rents too high for the market. Additionally, some developers are abandoning phase two projects of successful phase one projects that were begun as recently as 2010.
"For starts to stay at this level, or to increase from this point, there will have to be more starts in the suburbs, but we won't know until we have data from the summer months," said Jay Denton. "However, we do believe that it will become more difficult to start new projects with oversupply occurring in key submarkets, the continuing decline of Class A rent growth, and increasing construction costs."
The accompanying chart illustrates the trend in construction starts according to Axiometrics pipeline data.
About Axiometrics
Axiometrics is the only multifamily research provider to survey every property in its database at the floor plan level every month. Every property. Every month. Only Axiometrics. Learn more at www.axiometrics.com or by calling 214-953-2242.
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Contact Information:
Contact:
Ross Coulter
214-394-5538
ross@mpdventures.com
