Multifamily Market Sees Rent, Occupancy Growth
The multifamily market’s healthy growth continues, shown by continued not-too-fast, not-too-slow rent and occupancy growth.
Yardi Matrix, Santa Barbara, Calif, reported the average U.S. multifamily rent increased $2 during August to $1,472. The research firm’s monthly Multifamily Rent Report called rent growth “exceptionally consistent” at 2.7 percent or higher since early 2018.
“Rent growth is healthy to above-trend in virtually every major market,” Yardi Matrix said. “Consistency extends in a number of directions. For example, the growth for the luxury ‘lifestyle’ [renter] segment has increased to roughly the same level as that of the ‘renter-by-necessity’ segment.”
Zillow Director of Economic Research Skylar Olsen said rental markets continue to feel the pressure of insufficient building in the past, “a reality not overcome by the surge in large, pricier apartment buildings in downtown areas,” she said. “Most of these buildings continue to readily lease up and rent growth is expected to continue.”
Olsen noted apartment rents grew faster in August than a year ago and noted while 46 of the 50 largest markets showed decelerating annual home value growth, annual rent growth accelerated in 41 of the largest 50 markets.
“But it’s important not to overstate this acceleration in rent growth, and to instead take a wider view of general stability in the national rental market,” Olsen said. Annual U.S. rent growth has not fallen below 1.5 percent year-over-year or grown faster than 2.5 percent at any time in the last 12 months. “Since the end of 2011, the average annual pace of U.S. rent growth in a given month has been 2.4 percent, so current growth is in line with the long run,” she said.
RealPage, Richardson, Texas, said U.S. apartment occupancy also continues to climb. “Strength among major markets is nearly universal,” said RealPage Analyst Julia Bunch. She said the 150 largest apartment markets averaged a 96.3 percent occupancy rate in August, the highest rate since the year 2000. “August marks the seventh consecutive month of the current occupancy uptrend,” she said.
Yardi Matrix said the multifamily market’s accomplishments are not a mystery. “The combination of strong demographic trends, social changes that create demand for apartments, demand for new housing and the country’s long period of economic growth have propelled the segment,” the report said. “With the exception of the economy’s performance, most of those trends are long-term in nature. So while the signs of economic risk such as the inversion of the yield curve have to be taken seriously, long-term trends remain more favorable for multifamily than for other segments of the economy or even commercial real estate, which will be helpful if and when the economy starts to slow down.”
