Apartment Occupancy Increases

U.S. rental apartment occupancy reached 96.5 percent in the third quarter, just shy of the 96.8 percent peak set during the tech boom, reported MPF Research, Richardson, Texas.

“Many properties, especially communities at the middle-tier price point, are completely full,” said MPF Chief Economist Greg Willett. “While an upturn in high-end deliveries is yielding more product availability in select spots, most new projects are moving quickly through the initial lease-up process.” 

Willett noted that current-renter retention remains a big factor in the favorable balance between apartment sector demand and supply. “With loss of renters to home purchase holding below the historical norm, the limited churn of residents is helping keep the occupied apartment count high,” he said.

Apartment occupancy equaled 96.2 percent one year ago, Willett said.

But Yardi Matrix, Santa Barbara, Calif., noted that multifamily rent deceleration continued in September. “Although basically flat, average U.S. monthly rents dropped for the first time since November 2015,” the firm said. On a year-over-year basis, rents grew 4.7 percent nationwide in September, down 30 basis points from August’s pace and 200 basis points from the recent high in October 2015.

New apartment completions should reach 360,000 this year–the largest number in the current cycle, Yardi Matrix said. It noted that new supply will maintain downward pressure on rent growth. “Significant supply increases are occurring in San Francisco, Denver and Houston, metros where rent growth was 2 percent or below on a year-over-year basis in September,” the report said. “[Then] as supply is absorbed and construction moderates, these metros will likely revert back to a stable long-term growth rate.”

MPF and Yardi Matrix agreed that multifamily fundamentals remain strong. “Occupancy has remained unchanged since May and is staying near historic highs,” Yardi Matrix said. “The employment sector, while not as robust as it once was, has been creating jobs at a steady pace. Demand for multifamily housing is forecast to remain high, as Millennial household formation continues and Boomers seek to downsize and re-enter the rental market.”