Apartment Occupancy Solid in May, Continues Steady 2023

(Courtesy RealPage)

Apartment occupancy is holding steady year-to-date so far in 2023, with May’s apartment occupancy rate at 94.7%–and flat from April, RealPage, Richardson, Texas, reported.

After significant variation in 2022, occupancy rates are coming more in line with long-term norms.

RealPage points to more moderate inflation, including in rent, as helping leasing momentum, which it said is continuing to accelerate after a big slowdown in the second half of 2022.

“RealPage’s view going into 2023 was that demand would improve as inflation cooled and consumer confidence improved, helping unleash housing demand that didn’t materialize in 2022 despite big job gains. So far, that story is playing out,” said Jay Parsons, Senior Vice President, Chief Economist for RealPage.

However, RealPage also sees a challenge coming for the sector–completions are about to reach the highest level in four decades. More than 500,000 new units are expected to complete in each of the next two years.

Other metrics are starting to normalize as well. In May, 52.3% of apartment renters with leases set to expire renewed. That’s about 2 percentage points above the pre-COVID average for May, but below May 2022’s 56.9%.

Effective asking rents for new leases climbed 0.39% from April, the smallest increase for May in more than a decade; year-over-year rent growth was at 2.3%, marking the lowest since April 2021.

“May is typically the time of year when we see some of the largest seasonal rent bumps. But what we are seeing right now is that new supply is doing what it’s supposed to do–which is put downward pressure on rent growth,” Parsons noted. “More supply and more availability means that property managers are competing for renters again, which hasn’t really happened since 2020.”

Additionally, renewal rent growth decelerated for the 10th consecutive month, at 6.5% in May. Renewals continue to grow more than new leases, but only because of the still-wide gap between rents a year ago and asking rents today.