SOURCE: Axiometrics Inc.

Axiometrics Inc.

November 18, 2014 11:00 ET

October Effective Rent Growth Highest of 2014

DALLAS, TX--(Marketwired - November 18, 2014) - National annual effective rent growth reached 4.33% in October, a 2 basis point (bps) increase from September's 4.31% and the highest point of the year to date, according to the latest data from Axiometrics, the leader in apartment market research and analysis. October marked the eighth straight month in which effective rent growth has increased.

The continued strong effective rent growth indicates that the national apartment market is likely to finish the year above the 4% mark. Even taking seasonality into consideration, Axiometrics does not expect the market to change too drastically during the remaining two months of the year.

"Effective rent growth typically declines during the fourth quarter, but not so far in the 'Year of the Apartment,'" said Stephanie McCleskey, Axiometrics Vice President of Research. "Even though the rate of increase has slowed, the fact the market is steady means that the factors fueling the strength of 2014 -- job growth, desire to rent instead of own and barriers to homeownership -- are still in force."

YTD Rent Growth Remains in Lead

Whether year-to-date (YTD) effective rent growth remains above 5% during the usual holiday-season leasing doldrums remains to be seen. "But it still looks like a good bet for 2014 YTD effective rent growth to be above 4.0%," McCleskey said.

YTD effective growth measured 5.2% for the first 10 months of 2014, down 30 bps from September's 5.5% but up 27 bps from the 4.9% YTD growth recorded in October 2010. The 2010 trend decreased by 40 bps to 4.5% during the last two months of that year; 2014's rate would have to slide 67 bps to fall below the first year of this decade.

Class B Continues to Strengthen

Annual effective rent growth in all basic asset classes has increased, but the strength of the market is currently in the Class B and suburban assets, which were closer to 5% annual effective rent growth during October.

In fact, Class B rent growth was exactly 5.0% in October, holding steady from the September figure and up from 3.2% in October 2013. Class B claimed first place from Class C among the asset classes in April, and has widened its lead ever since.

Class C annual effective rent growth, though above October 2013 levels, suffered a slight decrease from 4.2% in September to 4.0% in October. Still, that rate is higher than the 3.7% recorded one year ago. Class C has had the steadiest rent-growth trend among the three basic asset classes since December 2012, with only a 90 bps range from 3.3%-4.2%

At 3.9% in October, Class A annual effective rent growth was the strongest it has been in the past two years and continues an upward trend that has lasted throughout most of 2014. Class A's October number is up from September's 3.5% and the 2.6% of October 2013. Should the trend continue into November, Class A could surpass Class C for second place behind Class B.

"Class B has gained momentum this year as new Class A supply has been delivered," McCleskey said. "The high rents of the new units is out of the range of many workers, so demand for lower-priced, Class B units has increased."

Occupancy at October High

The national occupancy rate dropped to 94.9% in October, the first time it has been below 95% since April, but the news is good when taken in context. October 2014 occupancy is higher than any other October since at least 2008, when Axiometrics started reporting monthly, and occupancy is 95% on a same-store, annual basis.

"The first and fourth quarters of a year typically have lower occupancy than the spring and summer months, and this year's rates are following the cycle," McCleskey said.

California Dominates Again

San Jose had the strongest effective rent growth among Axiometrics' top 50 metropolitan areas (determined by number of units) in October, usurping Bay Area neighbor Oakland by mere percentage points. The Oakland market continued to have the highest rental revenue growth in the top 50.

California claims six of the top 17 markets, with San Francisco at No. 4, to give the Bay Area three of the top four places. Florida also is well-represented, with four metro areas among the top 17. The three major South Florida metros -- West Palm Beach, Fort Lauderdale and Miami -- came in at Nos. 6, 10 and 13 on the list, respectively.

Houston is no longer in the top 17, falling just below San Diego and replaced by Riverside.

         
 
 
 
 
Annual Effective Rent Growth Occupancy Rate Revenue Growth
Rank MSA Oct-13 Oct-14 Oct-13 Oct-14 Oct-13 Oct-14
1 San Jose, CA 6.4% 11.5% 96.0% 96.4% 6.8% 11.9%
2 Oakland, CA 8.4% 11.5% 96.3% 96.9% 8.0% 12.1%
3 Denver, CO 7.0% 10.0% 95.7% 96.1% 7.4% 10.4%
4 San Francisco, CA 8.4% 8.7% 96.0% 96.7% 8.8% 9.5%
5 Sacramento, CA 4.7% 8.7% 95.7% 96.4% 6.4% 9.4%
6 West Palm Beach, FL 3.8% 8.2% 95.2% 95.8% 5.2% 8.8%
7 Atlanta, GA 5.3% 7.4% 93.7% 94.1% 6.5% 7.8%
8 Portland, OR 7.5% 6.9% 96.0% 96.2% 8.6% 7.1%
9 Seattle, WA 6.7% 6.2% 95.3% 95.4% 6.9% 6.3%
10 Fort Lauderdale, FL 3.0% 6.0% 95.1% 95.5% 3.3% 6.4%
11 Orlando, FL 2.9% 6.0% 94.6% 95.5% 3.1% 6.9%
12 Phoenix, AZ 3.0% 5.9% 93.5% 94.2% 3.3% 6.6%
13 Miami, FL 4.9% 5.7% 96.4% 96.7% 4.9% 5.9%
14 Riverside, CA 2.7% 5.6% 95.2% 96.1% 2.9% 6.6%
15 Fort Worth, TX 3.5% 5.4% 94.7% 95.0% 3.9% 5.7%
16 Charleston, SC 3.4% 5.2% 94.6% 95.2% 4.5% 5.8%
17 San Diego, CA 3.5% 5.2% 95.8% 96.3% 3.6% 5.6%
  National 3.0% 4.3% 94.7% 95.0% 3.2% 4.7%
 
*Rank is based on annual effective rent growth in October 2014 for Axiometrics Top 50 Markets. Axio tracks properties in more than 450 MSAs throughout the country.
 
Source: Axiometrics Inc.
 

About Axiometrics

Axiometrics improves property and portfolio performance for apartment investments. Confident investment decisions begin with reliable, timely information. No one has more accurate, detailed, and up-to-date research on the apartment and student housing markets. Learn more at www.axiometrics.com or by calling 214-953-2242.

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