DALLAS—US multifamily continues to gain strength—more than expected, in fact. In a report provided exclusively to GlobeSt.com, Dallas-based Axiometrics says annualized rent growth nationally reached 4.0% in the third quarter for the first time in nearly two years, while quarterly effective rent growth increased significantly over Q3 2013.

Occupancy also notched north of 95%, breaking the record of 95.0% set last quarter, which had been the highest since Q1 2001. Q3's quarterly growth in effective net rents increased to 1.6% from 1.2% the year prior, continuing a pattern of year-over-year improvements established at the start of 2014.

“That 1.6% growth is great for the summer season,” says Jay Denton, SVP at Axiometrics. “The quarterly numbers this year show a stronger apartment market than we anticipated at the start of the year.”

Three of Q3's top performing MSAs for quarterly effective rent growth are in California, led by Oakland-Fremont-Hayward at 10.7%. Not far behind is San Jose-Sunnyvale-Santa Clara with 10.5% for Q3, followed by Denver with 9.3%, Sacramento with 9.1% and Atlanta with 7.5%. Rounding out the top 10 were Miami with 6.7%, San Francisco with 6.6%, Seattle with 6.5%, West Palm Beach, FL with 6.3% and Charleston, SC with 5.7%.

While effective rent growth for Q3 was lower than the 2.7% rate measured in Q2, the quarterly decrease is in line with historical norms, Denton says. Typically, Q2 is usually the best of the year and rent growth moderates after June, according to Axiometrics data.

Since existing product is basically filled to capacity, new supply is needed to meet the demand. Currently, says Denton, demand exceeds supply.

“New supply is hitting when the apartment market is already full,” says Denton. “We need units for people to simply have a place to live. Because of that, landlords are not under a lot of pressure to lower rents.”

Demand is strong, Axiometrics says, because more people want to rent. Job growth has been high for most of 2014, millennials are delaying marriage and having children, and a fair number of Americans are disinclined to move out of apartments and purchase homes for reasons including mobility, proximity to work and play and more restrictive mortgage requirements.

A major change seen over the past year has been the decreasing rent growth in urban cores and increasing rent growth in suburban submarkets. “A higher concentration of deliveries is taking place in downtown/uptown/center-city areas, so existing properties are moderating rent to stay competitive and retain residents,” Denton says. “While more total supply is being delivered to suburban markets, those units are more spread out, and the competition is not quite as keen.”

Boston, for example, is seeing a building boom in the sector, as panelists at RealShare Boston made clear earlier this month. Yet across the metro area, annualized effective rent growth was 6.0% in the West/Northwest Suburban submarket, but  rent growth went into the negative column in the Central City/Back Bay/Beacon Hill submarket at -1.1%. In the Denver area, the Aurora-Central-Southwest submarket experienced 13.5% annualized growth this quarter, compared with 3.3% in the Denver-Downtown submarket.

Axiometrics' KC Sanjay will be among the experts headlining the “Economics of Multifamily” panel at RealShare Apartments next month in Los Angeles. Scheduled for Oct. 15 and 16 at the Westin Bonaventure, the conference will also focus on development, finance and investment.