SOURCE: Axiometrics Inc.

Axiometrics Inc.

March 25, 2014 07:00 ET

February Effective Rent Growth Continues Slowing, Though Remains Positive

Markets in California, Florida and Texas Outpace National Trend

DALLAS, TX--(Marketwired - March 25, 2014) -  Axiometrics Inc., the leading provider of apartment market research, reports today that national annual effective rent growth decreased slightly in February to 2.8%, while occupancy increased slightly to a national average of 94.3%. Axiometrics reports that annual effective rent growth has been moderating at the national level for the past two years, though many metropolitan statistical areas (MSAs) in California, Florida and Texas continue generating rent growth of more than 5.0%.

"With the extremely strong rent growth seen in 2010 and 2011 it was inevitable that it would begin to moderate, which has been the case now for about two years," said Jay Denton, vice president of research for Axiometrics. "By historical standards, however, the apartment market is still strong, especially in some coastal areas and regions of robust job growth, like Texas. We pointed out recently that oversupply could become a concern in some markets. Affordability could also be an issue with so many high-priced units coming to the market. The next few quarters will be telling as deliveries continue to increase."

Effective Rent Growth and Occupancy
February's effective rent growth rate of 2.8%, while still positive, was almost three quarters of a point lower than 3.53% reported in February 2013. Despite this overall slowing trend, 21 of the top 121 MSAs experienced annual effective rent growth greater than 5.0%. Metros in Florida, California and Texas continued as top performers for the month, with Naples, FL once again ranking first nationally with an annual effective rent growth rate of 13.0%. Naples was followed by Odessa, TX, an MSA with an 11.5% annual effective rent growth being fueled by the energy boom.

Other selected MSAs with an annual effective rent growth rate greater than 5.0% included:

  • Santa Rosa, CA (9.4%)
  • Oakland, CA (8.6%)
  • San Francisco, CA (8.1%)
  • San Jose, CA (8.0%)
  • Portland, OR (7.6%)
  • Miami, FL (7.4%)
  • Denver, CO (6.7%)
  • Seattle, WA (6.1%)

For the eighth consecutive month, Washington, DC ranked as one of the weakest MSAs with annual growth at -1.5%. Philadelphia and New York are not far behind with growth rates of -1.3% and -0.3%, respectively. 

The national occupancy rate in February of 94.3% was up 14 basis points from January 2014 and up 10 basis points from February 2013. Occupancy remained at its high-water mark for the past 12 years, and currently, 45 of the top 121 MSAs have an average occupancy rate greater than 95.0%. The highest-occupied MSAs are listed below:

  • Athens, OH (98.5%)
  • Madison, WI (98.3%)
  • Naples, FL (97.8%)
  • Odessa, TX (97.7%)
  • Stockton, CA (97.3%)
  • Santa Rosa, CA (97.0%)
  • Newark, NJ (96.9%)
  • Napa, CA (96.7%)
  • Lansing, MI (96.4%)
  • Oakland, CA (96.4%)

Affordability Questions
One item Axiometrics notes in its latest research is the question of affordability for the new supply being delivered, both in the urban core and in the suburbs, where average rent levels tend to be less expensive. At this point, much of the new supply is being delivered in the urban core as A-class properties. A similar trend is happening in the suburbs. 

For most markets, the new product is priced somewhere between $1,000-$1,600 per unit, depending on location, unit mix, amenities and other factors. The vertical/urban product (such as high rises) coming online this year will be above that range, and for already expensive markets like Washington, DC and Seattle, prices will be $300 to $400 higher still. Axiometrics also reports that effective rents for properties delivered since 2012 average near $1,320 per unit and $1.46 per square foot.

Top- and Bottom-Performing Markets
The following table lists the top 10 and bottom 10 performing MSAs across the country. Rankings in the table are based on Revenue Growth, which is calculated by multiplying effective rent by the occupancy rate and figuring the change between periods.

 
Top and Bottom Performing MSAs
Rank* MSA  Annual Effective Rent Growth  Occupancy Rate  Revenue Growth
Feb-13  Feb-14  Feb-13  Feb-14  Feb-13  Feb-14
1 Athens, OH  1.4%  9.7%  94.6%  98.5%  2.2%  13.7%
2 Naples, FL  3.8%  13.0%  97.9%  97.8%  5.1%  12.9%
3 Odessa, TX  15.2%  11.5%  99.0%  97.7%  16.2%  10.3%
4 Santa Rosa, CA  6.0%  9.4%  96.6%  97.0%  6.6%  9.8%
5 Oakland, CA  7.4%  8.6%  96.0%  96.4%  8.0%  9.0%
6 San Francisco, CA  4.4%  8.1%  95.2%  95.6%  3.2%  8.5%
7 San Jose, CA  5.9%  8.0%  96.0%  96.0%  5.4%  8.0%
8 Portland, OR  3.0%  7.6%  95.2%  95.5%  3.3%  7.9%
9 Miami, FL  4.6%  7.4%  95.9%  96.3%  4.2%  7.9%
10 Vallejo, CA  1.3%  6.8%  95.6%  96.4%  1.9%  7.7%
                     
112 Ann Arbor, MI  5.9%  -0.8%  96.5%  95.9%  6.4%  -1.4%
113 Washington, DC  1.6%  -1.5%  94.7%  94.6%  1.7%  -1.6%
114 Philadelphia, PA  2.6%  -1.3%  94.5%  94.1%  2.3%  -1.8%
115 Nassau, NY  4.6%  -1.0%  97.2%  96.1%  5.9%  -2.1%
116 Birmingham, AL  3.6%  -0.3%  93.6%  91.6%  6.2%  -2.4%
117 Little Rock, AR  0.8%  -0.9%  91.1%  89.0%  0.6%  -3.1%
118 Dayton, OH  3.9%  0.1%  94.9%  91.5%  4.7%  -3.4%
119 Fayetteville, NC  -1.8%  -5.8%  87.7%  87.0%  -0.3%  -6.6%
120 Huntsville, AL  3.0%  -5.2%  93.2%  91.5%  3.8%  -6.9%
121 Honolulu, HI  6.7%  -6.2%  95.9%  92.5%  8.0%  -9.8%
*Rank is based on annual effective rent growth in February 2014. Only the top 121 MSAs were used for the ranking. Axio tracks properties in more than 400 MSAs around the country.
 
Source: Axiometrics Inc.
 

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