In this edition of Radix’s Multifamily Insights, Chris Nebenzahl discusses the importance of focusing on traffic and leases as leading indicators for the multi-family industry. As we approach the prime rental season, which typically begins in March, it is essential to understand how traffic and leases can indicate how the rest of the year will go for the industry.
Nebenzahl notes that in normal years, multi-family fundamentals slow down in the fourth quarter, pick up in January, and accelerate in March, April, May, and June. However, over the past four to five years (excluding 2020 due to the pandemic), February’s traffic and leases have taken a pause or declined in many markets, both at the national and local levels.
Despite these declines, Nebenzahl highlights that these patterns are not cause for concern since the industry usually sees a sharp increase in the following months. He provides data to illustrate this trend, noting that, historically speaking, a slowdown in February often indicates another good rental season for the multi-family industry.
Nebenzahl further explains that the same pattern holds for new leases signed, where February marks a decline in new lease fundamentals, followed by a rapid acceleration in the months that follow. Even as 2023 has started with a flattening of new leases signed, he anticipates that this trend will continue as the industry returns to more stable footing after the pandemic.
He notes that traffic and leases tend to pick up very quickly in March, and occupancy and rent growth tend to lag, depending on the market. Nebenzahl cites Chicago as an indicative market that experienced a quick acceleration in traffic and leases in January and February, leading to a pick-up in rent.
In conclusion, the Radix Multifamily Inisghts video series emphasizes the importance of monitoring traffic and leases to understand the multi-family industry’s health and predict its future. The industry is expected to return to more stable footing as we emerge from the pandemic, and understanding these leading indicators can help to anticipate and respond to changes in the industry.
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