SOURCE: Axiometrics Inc.

Axiometrics Inc.

March 20, 2013 10:30 ET

Axiometrics Reports Slow, Steady Growth for Apartment Market in 2013 After Multiple Years of Above Average Gains

Boston and San Francisco, Two Recent Highfliers, Have Slowed

DALLAS, TX--(Marketwire - March 20, 2013) - Axiometrics Inc., the leading provider of apartment data and market research, reports that effective rent growth remained steady during February, at a rate of 3.53%, but that the pace of rent growth has been slowing in recent months. February's effective rent growth rate was the lowest since August 2010. Occupancy remained strong nationally with an average rate of 94.13% in February. This rate is up 35 basis points (bps) from February 2012 and 71 bps from February 2011.

"A pattern has emerged this year, as effective rent growth for Class A properties has really slowed down, Class B rates have remained relatively steady, but Class C rates have continued to increase," said Ron Johnsey, president for Axiometrics. "Rents had been pushed so much at the upper end of the market it was inevitable we would begin to see a slowdown in growth for Class A properties, but we may also be seeing some impact from new properties coming online in certain markets. As new deliveries increase later this year and next, the trend could become even more pronounced."

Effective Rent Growth and Occupancy
Nationally, annual effective rent growth declined from 3.62% in January to 3.53% in February; the annual growth rate was 3.96% a year ago. Axiometrics reports that the growth rate has slowed in nine of the last 10 months as many Metropolitan Statistical Areas (MSAs) are moderating from very strong rent growth the previous three years. Peak annual rent growth at the national level during this cycle was 5.32% in July 2011.

Breaking rent growth down by asset class, Class C properties continued to post the highest annual effective rent growth rates in February, at an average of 4.3%. Class A properties, which averaged effective rent growth of 4.9% in February 2012, declined to 3.2% in February 2013. While Class A and C properties have been on opposite growth paths in recent months, Class B properties have been very stable, with annual effective rent growth staying close to 3.6%.

Occupancy at the national level remained relatively stable in February, though it did increase from 94.05% in January to 94.13% in February. Axiometrics forecasts that the national average occupancy rate will reach 94.9% in 2013.

Currently, 28 of the top 88 MSAs have an average occupancy rate greater than 95.0%. Of note, three of the top 10 MSAs for occupancy (Naples, Sarasota, Miami) are in Florida, a state in which other markets are still offering significant concessions to attract tenants. 

Fewer Concessions Mean Higher Rents
As the market has tightened over the past few years, it has become increasingly difficult for renters to find rental concessions, at least in most MSAs. At the national level in February, concessions lowered asking rents 1.90%, which is the equivalent of 6.9 days of free rent on a 12-month lease. For comparison, Axiometrics reported that concessions lowered asking rents 3.09% last February and 4.62% two years ago. The peak for concession values was in December 2009 when asking rents were lowered 7.47% by the use of concessions. 

In December 2009, approximately 2,360 of the properties in Axiometrics' database were offering a concession of at least two months free rent on a 12-month lease; that number dropped to 335 properties in February 2013. While the number of properties offering at least two months free rent has declined substantially, most major MSAs still have a handful doing so. However, 67 percent of the properties offering two months free are concentrated in the Class B- to C- range. Only 28 properties in Axiometrics' database graded between Class A- and A++ are offering an average of two months or more free.

Top and Bottom Performing MSAs
Houston, Denver, Oakland, San Jose, Charlotte, and Seattle continue to rank in the top tier for revenue growth, which is calculated by multiplying the effective rent by the occupancy rate and taking the change between periods. 

Boston and San Francisco, two MSAs that consistently ranked in the top tier for revenue growth the past two years, recently dipped below the national average. Boston's revenue growth softened during the first quarter of 2012 and has settled at a rate below 3.0%. San Francisco's slowdown is more pronounced as it has fallen from a peak of 15.9% last February to 2.9% this February. Class A properties have slowed the most in San Francisco, with the level of rent this February 2.5% lower than it was a year ago. Class B properties have remained solid at a 5.9% growth rate but as in other markets Class C properties are leading the pack this year with a growth rate in San Francisco of 12.1%. 

  Top and Bottom Performing MSAs
Rank* MSA Annual Eff Rent Growth Occupancy Rate Revenue Growth
Feb-12 Feb-13 Feb-12 Feb-13 Feb-12 Feb-13
1 Corpus Christi, TX 6.82% 8.45% 94.58% 95.46% 10.0% 9.5%
2 Boulder, CO 3.01% 9.72% 96.05% 95.50% 2.6% 9.1%
3 Cape Coral, FL 5.11% 6.88% 93.51% 94.67% 6.5% 8.2%
4 Houston, TX 4.81% 6.71% 92.12% 93.27% 6.8% 8.1%
5 Oakland, CA 6.98% 7.27% 95.43% 96.05% 6.6% 8.0%
11 Denver, CO 7.05% 6.09% 94.30% 94.99% 7.0% 6.9%
14 West Palm Beach, FL 1.73% 5.13% 94.01% 94.86% 2.1% 6.1%
16 Salt Lake City, UT 3.67% 6.06% 95.91% 95.64% 5.5% 5.8%
18 Birmingham, AL 3.63% 3.51% 92.03% 93.91% 3.5% 5.6%
19 Charlotte, NC 6.93% 4.97% 94.15% 94.69% 8.8% 5.6%
20 Seattle, WA 6.59% 5.26% 95.24% 95.46% 6.6% 5.5%
  National 3.96% 3.53% 93.81% 94.16% 4.4% 3.9%
56 Boston, MA 7.42% 2.87% 95.55% 95.61% 7.3% 2.9%
58 San Francisco, CA 15.48% 4.35% 96.32% 95.00% 15.9% 2.9%
60 Riverside, CA 1.16% 1.75% 93.90% 94.68% 0.8% 2.6%
73 Baltimore, MD 3.05% 1.60% 94.83% 94.52% 3.4% 1.3%
77 Las Vegas, NV -1.14% 0.79% 91.63% 91.19% -0.8% 0.3%
84 Winston, NC 2.21% 0.32% 92.92% 92.05% 4.0% -0.6%
85 Salinas, CA 0.67% 1.17% 94.22% 92.42% 1.8% -0.8%
86 Albuquerque, NM 0.19% -0.11% 93.22% 92.41% -1.8% -1.0%
87 Chattanooga, TN 2.22% 1.14% 95.46% 93.18% 3.4% -1.3%
88 Tucson, AZ 2.04% -1.52% 92.08% 91.46% 3.2% -2.2%
*Rank is based on annual revenue growth in February 2013. Only the top 88 MSAs were used for the ranking. Axio tracks properties in more than 400 MSAs around the country.
Source: Axiometrics Inc.

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 or by calling 214-953-2242. 

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