Two Robust Multifamily Markets Illustrate New Realities
Florida and Atlanta spotlight how new supply pushes down rent growth.
RealPage took a recent look at the two once strong markets of Florida and Atlanta and compared their year-over-year effective asking rent growth as of August 2023 and year-over-year inventory growth for the year. Here is what it found, namely lots of new inventory and not enough apartment takers so downward pressure on rents has emerged. But this trend is not yet happening in all other markets.
Florida ranked for this study at the end of the second quarter as the third-fastest growing area at 3%, following the Carolinas at 3.6%, the Mountains/Dessert at 3.2% and ahead of the Southeast at 2.6%. But all those new apartments mean pressure on rent growth, which was down in August by 0.7% for Florida, versus -0.5% for the Carolinas, -2.1% in the Mountains/Desert and the Southeast at -0.2%.
Other regions in this survey saw other downturns but also some upturns with the Midwest and East Coast notable for their positive rent change Y-o-Y at 3.1% and 2.5%, respectively. Others in the survey included Texas, which had Y-o-Y net inventory growth at 2.3% and rent change at minus -0.3%; the Midwest at net inventory of 1.4%, the East Coast at net inventory growth at 1.2% and finally the West Coast at net inventory growth at 1.1% and rent change at minus 0.8%.
Atlanta experienced comparable results of the number of apartment takers not being enough to keep up with new supply. As a result, occupancy and rent change have declined to new lows of late, according to another RealPage report. Atlanta, like other Sun Belt apartment markets, recovered after Covid and saw strong in-migration. New apartment deliveries hit an all-time high of 16,715 units in the year-ending second quarter, and another 36,575 units are underway with 22,000 set to be completed this year. The market also has a strong number of build-to-rent properties coming to the area, putting it at No. 3 in that category.
But there just have not been enough apartment seekers to compensate, pushing down occupancy to 92.6%, its lowest since February 2014, more than the decline overall in the country. And it’s happening more in the city’s suburban submarkets than its urban centers since 2021. Also, Class C stock lost more ground in the last two years than A and B properties, as many sought quality. In Class C, occupancy sank to 91.8% versus 93% for classes A and B.
How did the city’s asking rent change? It also turned negative in May of this year and has been worsening. As of August, prices were cut by 3.7%, the worst showing in two decades. Urban subs saw a larger decline in rents but not much worse than what happened in the ‘burbs. Rents also came down more in Class C inventory in the past year than in A and B classes.