Apartment Rent Growth Down, Occupancy Up

Apartment market performance moderated in February as the annual effective rent growth rate fell to 4.1 percent, a full percentage point lower than January, reported Axiometrics, Dallas.

Despite the slowing, February marked the 19th straight month with 4 percent or higher effective rent growth. The last time it dipped below 4 percent was in July 2014. Last month’s rate also represented the second-highest February figure since 2011’s 4.7 percent.

“National year-to-date effective rent growth hit a slow patch in February,” said Axiometrics ‎Competitive Pricing Systems Analyst Chris Clarke. He noted that January’s year-to-date figure stayed near its five-year average but at 0.7 percent February fell short of its 0.9 percent five-year average.

“[But] February is not the most accurate measure for full-year effective rent growth,” Clarke said. “The story of the 2016 apartment market is yet to be told.”

Online rental marketplace Abodo, Madison, Wis., said the sector’s near-record high occupancy levels and steady rent growth will likely continue. “Those who are wondering how long those good times will last may be pleased with the answer,” Abodo’s March Apartment Report said. “The robust demand is not just a flash in the pan, but potentially a fundamental shift fueled by an expanding pool of renters.”

Changing demographics boost the rental market, Abodo said: “On one side are aging baby boomers and empty nesters that are downsizing from a home to a rental that is less cumbersome in terms of upkeep, maintenance and expense. On the opposite side is the up-and-coming generation of young millennials.” Abodo said these two groups of renters create a “barbell effect” that drives more customers to apartments.

Pew Research, Washington, D.C., reports nearly 74 million baby boomers between 51 and 69 and more than 75 million millennials between 18 and 34.

“Those demographics are expected to produce sustained demand and continued rent growth,” Abodo said.

Research firm Reis, New York, agreed. It predicted that apartment vacancies will remain in the 5.5 percent range through 2019.