Year-End Brings Mixed Results for U.S. Apartment Industry

The national occupancy rate was down 0.1% YoY, but the leased percentage rate had risen by 0.2%. So, frankly, most of the national operating metrics are not down a whole lot from their pre-pandemic highs. This doesn't mean that certain metros haven't experienced major turbulence.

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Happy New Year! I hope you all got through the incomparable 2020 OK – here’s hoping that 2021 goes much better for us all.


According to data from the Radix database of close to 5 million apartment homes nationwide, last year ended with mixed results for the apartment industry. For example, during the seven-day period ending on Dec. 27, traffic was down slightly (by 2.8%) on a year-over-year basis, while leases were up by 12.2%. The increase in leases is mainly due to the creativity and technology operators are using to do more with less traffic, such as virtual tours.


On the other hand, the national occupancy rate was down 0.1% YoY, but the leased percentage rate had risen by 0.2%. So, frankly, most of the national operating metrics are not down a whole lot from their pre-pandemic highs.


However, this doesn’t mean that certain metros haven’t experienced major turbulence.


For instance, occupancy rates decreased YoY in San Jose (-2.2%), Seattle (-1.7%), and San Francisco (-1.1%) during the week ending on Dec. 27. But those rates are down even more considerably when one takes into account only downtown areas and excludes suburbs and exurbs. Some core downtown areas across the country were down as much as 10% in occupancy throughout the year.


The national net effective rent (NER) was certainly one metric that unequivocally decreased YoY (-8.9%) during the week ending on Dec. 27. This is as steep a drop as we’ve seen since the pandemic hit in mid-March.


As it relates to NER, the impact is still uneven, with San Francisco down 23.1%, Seattle down 21.4% and San Jose down 21% YoY on Dec. 27. The majority of the markets tracked by Radix were down by single digits YoY. But the clear YoY winners were the four markets that have been positive the entire year: Riverside, Calif. (7%), Tampa (4.6%), Phoenix (4.2%), and Las Vegas (2.5%). As we have stated previously, this is a major reversal of fortune from the last downturn, when these were some of the most negatively impacted markets in terms of rents and occupancy. All four metros are also leading in occupancy and leased percentage. 


In terms of NER performance by floorplan, across the country studios were down 16.5% YoY, while one-bedrooms were down 10.5%, two-bedrooms down 7.2% and three-bedrooms down 5.4%. There is a clear trend in migrating towards larger units as people have been spending most of their time inside their homes. But many urban properties, which as stated previously are underperforming, have a higher concentration of smaller units. This creates a double negative impact on core urban communities. 



Key Takeaways – Data as of 12/27:


  • Traffic and Leases: traffic was down 2.8% YoY. This is much improved from the beginning of the pandemic when traffic was down approximately 75%. Leases per property were more or less on par with one year earlier and were up 0.2% YoY.


  • Occupancy and Leased Percentage: Occupancy was down 0.1% YoY, and Leased Percentage was up 0.2% YoY.
    • Riverside closed the year with the highest occupancy of any metro at 97.21%, followed by Las Vegas (96.11%) and Phoenix (95.56%). 


  • NER was down 8.9% YoY. San Francisco (-23.1%), Seattle (-21.4%), and San Jose (-21.0%) declined the most. Riverside, CA (7%), Tampa (4.6%) and Phoenix (4.2%) led the country in NER growth for the year.


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