Apartment Occupancy Hits Six-Year Peak

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DALLAS—More evidence that multifamily is proceeding from strength to strength. A month ago, Axiometrics released data showing that apartment rent growth hit a post-recession peak; this time, it's occupancy that is posting the strongest national performance since the Dallas-based firm began keeping track on a monthly basis.

As of May, national apartment occupancy had reached 95%, Axiometrics said Thursday. Stephanie McCleskey, the firm's director of research, says Axiometrics began tracking apartment data on a monthly basis in April 2008, “and this is the first time since then that occupancy has been 95%.” It has risen steadily for the past four months, she adds.

Previously, Axiometrics tracked data on a quarterly basis. “The second quarter of 2001 was the last time the market was at 95% for a quarter,” says McCleskey. “It's a pleasant surprise, because it's coming at a time when new supply is flooding the market.”

Nationally, about 180,000 new units have come on line over the past 12 months. However, absorption has been high, and the effect on both rent growth and occupancy has been positive. Effective rent growth was up 3.7% year-to-date in May, the strongest growth rate since the trough of the recession. Annualized effective rent growth also hit a new peak in May: 3.5%, up 10 basis points over April and the strongest in 16 months.

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“The year-to-date effective rent growth numbers portray an apartment market that may be having its strongest year since the Great Recession ended,” says Jay Denton, Axiometrics' VP of research. “The May 2014 YTD rate of 3.7% was stronger than the 3.4% for all of 2011 and 2012, which had the next strongest first five months of the recovery.” He adds, however, that June will have to show YTD growth of 4.2% in order for '14 to remain “the strongest of the recovery years.”

Five of the top 10 metro areas for annualized effective rent growth were in Northern California, including Napa, up 12.26%; Vallejo-Fairfield and Santa Rosa-Petaluma, both up 10.26%; Oakland, up 9.97%; and San Jose, up 8.7%. The top metro area for annualized effective rent growth was Odessa, TX, as it was in March and April, although its May figure of 13.24% represented a gain on April's 11.6%. Rounding out the top 10 were Honolulu (up 12.02%), Naples-Marco Island, FL (8.46%), Denver (8.38%) and Bradenton-Sarasota (7.51%).