The average U.S. multifamily rent reached an all-time high of $1,409 in July as rents increased 2.8% year-over-year with the $3 increase from June and up 3 percent year-to-date, according to a survey of 127 markets by Yardi® Matrix.
The July performance arose from strong second-quarter economic growth and healthy demand.
“One could say the market is experiencing typical summer growth, a good sign considering the length of the cycle, which has some worried that the party might be nearing its end,” the report says. “Economic conditions remain favorable for the multifamily industry, especially in secondary markets that are leading the nation in employment growth.”
Highlights of the multifamily rents report
- Rents are up $41, or 3.0% year-to-date, which is in line with growth figures during the same period in recent years. That’s encouraging because it once again shows that the expansion has not run out of steam despite headwinds of increased supply and affordability issues.
- Growth continues to be led by secondary markets in the throes of strong late-cycle economic performance.
- Low unemployment, a strengthening economy and benefits of tax reform appear to be underpinning absorption and rent growth.
- Occupancy changes remain negative in most top 30 metros, but the rate of decline is slowing, while overall occupancy levels remain well within the normal range.
The year-over-year rent growth leaders remained virtually unchanged from June: Orlando, Fla., Las Vegas, California’s Inland Empire and Phoenix. Sacramento, Calif., replaced Tampa, Fla., in the fifth spot. Rents grew year-over-year in each of the country’s top 30 metros in July.
View the full Yardi Matrix Multifamily National Report for July 2018 for additional detail and insight into 127 major U.S. real estate markets.
Top 10 cities multifamily rents growth, supply and occupancy trends
Despite heavy new supply over the past three years, the multifamily industry continues its forward trajectory, the report says.
The growth in multifamily rents has decelerated since the beginning of 2017, but rents continue to increase steadily.
The moderation in rents was caused in part by the decline in occupancy rates to 95.0 percent at the end of last year, but they increased to 95.2 percent during the first half of 2018.
Most new apartments are in the top 30 metros
The vast majority of new supply in recent years has been delivered in the top 30 metros. As a result, the average occupancy rate in those metros fell roughly 100 basis points in 2016 and 2017. Some metros with the biggest supply growth—Nashville, Portland, Raleigh and Seattle, for example—also saw the most deceleration in rent growth.
That occupancies are healthy despite the abundant delivery schedule in those markets speaks to the healthy demand for apartments stemming from the growth in renter-age households and the strong economy. It also demonstrates the significant long-term growth potential in those metros.
About Yardi Matrix:
The company offers comprehensive market intelligence tools for investment professionals, equity investors, lenders and property managers who underwrite and manage investments in commercial real estate. Yardi Matrix covers multifamily, industrial, office and self storage property types. Email firstname.lastname@example.org, call 480-663-1149 or visit yardimatrix.com to learn more. Yardi® develops and supports industry-leading investment and property management software for all types and sizes of real estate companies. Established in 1984, Yardi is based in Santa Barbara, Calif., and serves clients worldwide. For more information visit yardi.com.