Anemic Demand Pushes Multifamily Occupancy Below Pre-Pandemic Norms
November occupancy clocked in at a relatively high 95.1%, down 240 bps over the year.
Weak new-lease demand has pushed apartment occupancy below pre-pandemic highs, according to the latest data from RealPage.
While November occupancy clocked in at a relatively high 95.1%, it’s below the November 2019 watermark of 95.6% and fell 20 bps in the last month and 240 bps year-over-year.
The issue, according to RealPage, “is at the front door.” Turnover last month was the second-lowest for any November on record, but leasing traffic among prospective renters ranked as the weakest for any November in eight years. RealPage analysts note “there’s little evidence that renters are doubling up to any significant degree.”
“There is very little net new demand for any type of housing right now, despite strong growth in jobs and wages,” said Jay Parsons, RealPage’s Head of Economics and Industry Principals. “We’ve never before seen new-lease apartment demand freeze up during a period of solid job gains like it has this year. We’re on track to end 2022 with the weakest net apartment demand since 2009. Low consumer confidence and weak household formation tells us Americans are in ‘wait and see’ mode.”
Phoenix and Las Vegas, both pandemic-era beneficiaries of significant in-migration from other markets, showed the largest occupancy declines over the past year (down about 400 bps) among major markets, according to RealPage.
Rents were also down 2% month over month in November in Fort Walton Beach, Fla., and Boise, while Honolulu and Vallejo/Fairfield/Napa, Calif. posted year-over-year declines in November. Among larger cities, San Jose posted the deepest month-over-month slump at 1.7%, while both San Francisco and Oakland registered cuts in excess of 1%. Other key markets with rent reductions less than 1% last month were Raleigh/Durham, Austin, Charlotte, Seattle, Phoenix, Tampa, Las Vegas and Denver.
Parsons says the current pace of weak new-lease demand suggests “deeper-than-normal rent cuts” this winter.
“Increased vacancy due to weak new-lease demand will likely encourage more turnover among current in-place residents who suddenly have more options in 2023,” Parsons said. “That’ll be especially true in Class A apartments competing for higher-income renters with the historic surge of new supply completing construction. It’s shifting toward a very favorable environment for mid- and upper-income renters looking for deals.”