WASHINGTON, DC—The volume of new-unit delivery through 2015 may tap the brake pedal when it comes to apartment rent growth, but it appears that nothing is going to bring the vehicle to a full stop, at least not for the three or four years. In a report on the multifamily sector, Cassidy Turley predicts annual rent growth of at least 2.5% to 5% nationally, notwithstanding projected delivery of 350,000 units through next year, or double the historic norm.

For one thing, the apartment sector has already absorbed 300,000 new units, again, double the historic norm. Demand has exceeded new supply for the past three-and-a-half years, says the report, prepared by a Cassidy Turley team led by chief economist Kevin Thorpe.

“So despite fears of overbuilding (from a national perspective), there is a lot of evidence that multifamily fundamentals will remain strong,” according to Cassidy Turley. “New deliveries will push vacancy up from its razor thin 4.1%,” although not enough to bring it back to its long-term average of 5.4%.

On a market-by-market basis, the study shows that New York City has the highest average asking rents at $3,187 citywide, with San Francisco coming in second at $2,171. In fact, if only the submarkets within San Francisco's city limits were considered, that average would balloon to $3,229 per month, thus putting it ahead of New York's five-borough average, although Cassidy Turley says a closer comparison would be between San Francisco and Manhattan, where the current metric is slightly below $3,500 per month.

“Regardless, San Francisco now challenges Manhattan as the most expensive place to rent in the US, but the aggressive rental rate growth of past few years is about to flatten,” the report states. Across the bay, San Jose has become the tightest rental market in the US, with its year-to-date vacancy rate slipping to 2.5% from 2.8% in 2013.

In the investment sales arena, Cassidy Turley notes that “a lack of available properties for sale has been a very challenging one in many markets. This has particularly been the case when it comes to investment-grade product.”

One effect this has had from Cassidy Turley's standpoint is to play havoc with some of the metrics. “A significant number of markets in our survey posted declining pricing metrics over the first half of 2014, but it is critical to remember that these averages are drawn from closed deals,” according to the report. “Many markets saw fewer class A projects trade hands over the past six months. Instead, deal activity remained focused on lower-priced class B or C or value-add projects.”

Naturally, this drove down average pricing metrics in many trade areas, “despite the fact that the general trend in nearly all US trade areas has been one of pricing increases,” according to Cassidy Turley. “In fact, even in those markets where we see the highest levels of vacancy and the lowest levels of rental rate growth, pricing has been flat at worst but on the rise in most cases.”

Multifamily investment sales as well as development will be part of the conversation when more than 2,000 industry professionals convene next month for RealShare Apartments. The two-day convention at the Westin Bonaventure in Los Angeles gets under way on Oct. 15.