No Slowdown in Sight for 2013

In spite of a sluggish economy, weak job growth and a slightly improving for-sale home market, the prevailing positive trends that have fueled the multi-housing sector’s impressive growth over the past 18 months will continue well into 2013 and beyond.

Annual apartment rent growth continues to run at impressive rates and industry leaders note that developers are now scrambling to bring new product on line. In fact, most believe that a construction wave is on the horizon to meet strong demand in major coastal markets, although this impending spike will mirror normal construction activity that took place prior to the 2007 recession.

According to second-quarter figures released by MPF Research that analyzed the top 100 metro markets in the country, effective rents for new apartment leases rose 1.2% in the second quarter and 4% from a year earlier. Greg Willett, vice president of Carrollton TX-based MPF, says that while rent growth was strong in the second quarter, it was down from the 4.8% posted at year-end 2011. The occupancy rate for multifamily rose to 95.2% at the end of the second quarter, up from 94.9% posted in Q1 and 94.4% at the end of 2011. In 2009, during the recession, the occupancy rate bottomed out at 92%.

“We’ve seen the momentum slow a bit as compared to the past couple of years,” Willett says. He relates that the near-record occupancy levels reflect that “we’re so full now that there are a lot of markets where there’s just no room for significant further absorption until we start delivering more product.”

The slight downturn in rent growth could be explained by two emerging demographic trends—more renters taking advantage of low home prices and low lending rates in the for-sale sector, as well as some renters being priced out of the market after two to three years of significant increases in rental rates…

…For the rest of the story, go to the September 2012 issue of Real Estate Forum online.