SOURCE: Axiometrics Inc.

Axiometrics Inc.

July 01, 2013 11:00 ET

National Rent Growth Slows for Eighth Consecutive Quarter

DALLAS, TX--(Marketwired - July 01, 2013) -  Axiometrics Inc., the leading provider of apartment data and market research, reports that at the national level annual effective rent growth slowed to 3.2% in the second quarter of 2013. For comparison, annual effective rent growth in the second quarter of 2012 measured 4.0%. Further, Axiometrics' data indicates that the effective rent growth rate has slowed for eight 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 20 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 eight 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 94.7% in the second quarter of 2013. A year ago the occupancy rate stood at 94.3%. The improvement in occupancy has occurred despite an increasing wave of new apartment supply. During the second quarter, 40,739 new apartment units were delivered, up from 18,861 units delivered in the second quarter of 2012. Apartment deliveries have totaled 124,500 over the trailing 12 months. With the pace of new deliveries increasing, the total for new deliveries in 2013 should reach 185,348 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 1.4% in the second quarter, which is the equivalent of five days free rent on a 12-month lease. For comparison, Axiometrics reported that concessions lowered asking rents 2.4% a year ago and 3.7% 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 second quarter of 2013, a trend that began in October 2012. Over the prior year, effective rents increased 4.1% for Class C properties, compared to 2.9% and 3.4% for Class A and B, respectively. Class C properties have an average occupancy rate of 93.3%, 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 23 basis points lower than a year ago.

National Performance by Asset Class
   Annual Effective Rent Growth  Occupancy Rate
Class  2Q12  2Q13  2Q12  2Q13
A  4.6%  2.9%  95.5%  95.2%
B  3.8%  3.4%  94.9%  95.1%
C  3.8%  4.1%  92.4%  93.3%

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

      Annual Effective  Occupancy
Rank  MSA  Rent Growth  Rate
1  Boulder, CO  9.8%  96.1%
2  Oakland-Fremont-Hayward, CA  9.6%  96.4%
3  Cape Coral-Fort Myers, FL  8.9%  95.0%
4  Corpus Christi, TX  8.4%  95.9%
5  North Port-Bradenton-Sarasota, FL  6.9%  94.9%
6  Denver-Aurora, CO  6.8%  95.5%
7  Palm Bay-Melbourne-Titusville, FL  6.8%  94.9%
8  Naples-Marco Island, FL  6.6%  98.0%
9  San Jose-Sunnyvale-Santa Clara, CA  6.5%  96.3%
10  San Francisco-San Mateo-Redwood City, CA  6.4%  95.8%
11  Houston-Baytown-Sugar Land, TX  6.0%  94.3%
   National  3.2%  94.7%
*Rank based on annual effective rent growth out of 88 MSAs 

In addition to having all 11 of the top rent growth markets, California, Colorado, Florida, and Texas also had several other high-ranking MSAs for rent growth: 14. Austin-Round Rock, TX (4.5%), 16. Jacksonville, FL (4.3%), 17. Miami-Miami Beach-Kendall, FL (4.2%), 22. Dallas-Plano-Irving, TX (3.9%), and 24. Tampa-Saint Petersburg-Clearwater, FL (3.8%).

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 182 MSAs around the country in 2013, and national deliveries will increase from 87,077 units in 2012 to 185,348 units in 2013.

Texas had three of the top five MSAs in the nation for units delivered during the second 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  Dallas-Plano-Irving, TX  1,303  3,203  5,882  11,104
2  Houston-Baytown-Sugar Land, TX  1,098  2,593  4,522  8,932
3  Washington-Arlington-Alexandria, DC-VA-MD-WV  1,149  2,479  6,173  11,318
4  Chicago-Naperville-Joliet, IL  393  2,079  1,373  4,448
5  Austin-Round Rock, TX  428  1,692  2,763  7,489
6  Los Angeles-Long Beach-Glendale, CA  81  1,563  781  5,038
7  Seattle-Bellevue-Everett, WA  618  1,464  2,821  7,458
8  Atlanta-Sandy Springs-Marietta, GA  185  1,448  1,537  5,157
9  Raleigh-Cary, NC  171  1,170  698  5,101
10  San Antonio, TX  535  1,138  2,205  4,021
   National  18,861  40,739  87,077  185,348
*Rank based on number of units delivered within the second 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 or by calling 214-953-2242. 

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