SOURCE: Axiometrics Inc.

Axiometrics Inc.

October 01, 2013 11:36 ET

National Rent Growth Moderates in the Third Quarter

DALLAS, TX--(Marketwired - October 01, 2013) - Axiometrics Inc., the leading provider of apartment data and market research, reports that at the national level annual effective rent growth moderated slightly to 3.2% in the third quarter of 2013. For comparison, annual effective rent growth in the third quarter of 2012 measured 3.7%. Further, Axiometrics' data indicates that the effective rent growth rate has slowed for nine consecutive quarters as many Metropolitan Statistical Areas (MSAs) are decelerating from very strong growth the previous three years. Peak annual rent growth at the national level during this current cycle was 5.3% in July 2011.

Despite the slowdown nationally, many individual markets are still generating very strong rent growth rates, with 23 of the top 88 MSAs reporting annual effective rent growth of greater than 4.0%. While the national growth rate has been slowly decelerating over the past nine quarters, it should also be noted that the current growth rate is still above the long-term average of 2.1%.

Occupancy at the national level remained strong, measuring 94.8% in the third quarter of 2013. A year ago the occupancy rate stood at 94.5%. The improvement in occupancy has occurred despite an increasing wave of new apartment supply. During the third quarter, 49,416 new apartment units were delivered, up from 27,128 units delivered in the third quarter of 2012. Apartment deliveries have totaled 142,684 over the trailing 12 months. With the pace of new deliveries increasing, the total for new deliveries in 2013 should reach 180,273 units by the end of the year.

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, concessions lowered asking rents 1.1% in the third quarter, which is the equivalent of four days free rent on a 12-month lease. For comparison, Axiometrics reported that concessions lowered asking rents 1.9% a year ago and 3.0% two years ago. The peak for concession values was in December 2009 when asking rents were lowered 7.5% by the use of concessions. 

Asset Class Performance
Class C properties continued to outperform Class A and B properties for effective rent growth in the third quarter of 2013, a trend that began in October 2012. Over the prior year, effective rents increased 4.2% for Class C properties, compared to 3.0% and 3.3% for Class A and B, respectively. Class C properties have an average occupancy rate of 93.5%, which is the lowest of the three groups, but they do show the best year-over-year occupancy growth. Class A properties have the highest occupancy rate at 95.2%, however this rate is 18 basis points lower than a year ago.

National Performance by Asset Class
             
   Annual Effective Rent Growth  Occupancy Rate
Class  3Q12  3Q13  3Q12  3Q13
A  3.8%  3.0%  95.6%  95.4%
B  3.4%  3.3%  95.1%  95.2%
C  3.6%  4.2%  92.6%  93.5%
             
             

Top Performing Markets
For the second quarter, 11 MSAs had annual effective rent growth of 6.0% or greater, and of those 11 markets over half were located California and Florida. The top MSAs for effective rent growth in the third quarter of 2013 are outlined below:

       Annual Effective   Occupancy
Rank   MSA   Rent Growth   Rate
1   Cape Coral-Fort Myers, FL   10.5%   93.7%
2   Naples-Marco   Island, FL   9.9%   96.6%
3   Oakland-Fremont-Hayward, CA   9.3%   96.6%
4   North Port-Bradenton-Sarasota, FL   8.4%   96.6%
5   Corpus Christi, TX   7.8%   96.0%
6   Boulder, CO   7.7%   95.1%
7   Portland-Vancouver-Beaverton, OR-WA   7.5%   96.3%
8   San Francisco-San Mateo-Redwood City, CA   7.4%   95.9%
9   Seattle-Bellevue-Everett, WA   7.3%   95.8%
10   Denver-Aurora, CO   7.1%   95.9%
11   San Jose-Sunnyvale-Santa Clara, CA   6.1%   96.2%
    National   3.2%   94.8%
          
*Rank based on annual effective rent growth out of 88 MSAs   

In addition to the top rent growth markets being predominately in California and Florida, Texas also had several other high-ranking MSAs for rent growth: 9. Corpus Christi, TX (7.8%) 13. Houston-Baytown-Sugar Land, TX (5.5%), 17. Austin-Round Rock, TX (4.6%), and 21. Dallas-Plano-Irving, TX (4.0%).

Top Markets for New Construction
Axiometrics also reports that the strong apartment performance the past three years has spurred a rebound in construction activity in many MSAs. Specifically, new units will be delivered in 192 MSAs around the country in 2013, and national deliveries will increase from 86,554 units in 2012 to 180,273 units in 2013.

Texas had three of the top 10 MSAs in the nation for units delivered during the third quarter. Axiometrics notes that even with the escalated delivery numbers from last year, the Texas MSAs still show some of the best effective rent growth rates in the country as demand is maintaining pace with supply.

MSAs Delivering the Most New Units in Second Quarter 2013
    Number of Units Delivered
    Within Quarter   Full Year
Rank*  2Q12   2Q13   2012   2013
1 Houston-Baytown-Sugar Land, TX 1,366   2,732   4,471   9,070
2 Dallas-Plano-Irving, TX 1,471   2,640   5,808   10,440
3 New York-Wayne-White Plains, NY-NJ 1,418   2,388   3,998   7,541
4 Baltimore-Towson, MD 656   1,751   1,946   4,228
5 Washington-Arlington-Alexandria, DC-VA-MD-WV 1,766   1,527   6,171   9,374
6 Denver-Aurora, CO 511   1,459   2,167   5,810
7 Seattle-Bellevue-Everett, WA 1,047   1,442   2,798   6,432
8 Raleigh-Cary, NC 119   1,351   695   4,258
9 San Antonio, TX 756   1,333   2,278   4,955
10 Chicago-Naperville-Joliet, IL 643   1,324   1,307   5,003
  National 27,128   49,416   86,554   180,273
               
*Rank based on number of units delivered within the third quarter.          

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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