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Rent and Operating Trends – Week of April 23rd 2023

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Rent and Operating Trends – Week of April 23rd 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The first estimate of Q1 GDP was released this week, and the U.S. economy grew at a 1.1 percent annualized pace to start the year. While growth remains positive, the slowdown may be a precursor of a coming recession. The equity markets are returning to slower paces of growth and volatility has receded. Over the past 6 months, the VIX index, a common proxy for the level of volatility within the stock market, has dropped 40%. Further slowing of inflation will provide more evidence to the Fed that their tightening campaign has been effective and that no additional rate hikes are needed. The PCE release will be the last inflation indicator announced before the Fed’s next policy meeting next week.

Multifamily fundamentals remained mostly unchanged at the national level last week. At the market level, outperformance was geographically diverse as West Coast metros led the way in traffic and leasing gains, while Baltimore and metros in the south led in weekly occupancy growth. The strongest NER growth was spread out between Minneapolis, Salt Lake City, Riverside CA and Boston. Geographic diversity of the strongest performing markets is a good thing as it indicates demand in a variety of locations.

Key Takeaways – Data as of 04/23/2023

Traffic and Leases:

  • San Jose and Charleston led all markets in traffic growth last week, as the average property in each metro added nearly 1 tour. Following behind were San Diego, Portland and San Francisco, all of which added a half tour per property on average.
  • Leasing followed a similar trend with San Jose and Charleston also leading the nation.
  • Chicago maintains the most average traffic per property with 12.3 tours per week last week, however San Jose recently reached the second spot in our rankings. Dallas and Houston maintain some of the highest traffic in the nation, but the rate of growth has stalled.

    Occupancy and ATR:
  • Nationwide occupancy increased by one basis point again last week.
  • While occupancies in many markets are recovering slowly, several metros with significant new supply pipelines continue to see occupancy declines. Charleston, Phoenix, Charlotte and Raleigh all have been dealing with a glut of new units that has pushed occupancy downward, especially for high-end product.

    Net Effective Rent:
  • Net effective rent growth in the major gateway markets continues, as New York posted a strong weekly gain. Rents in the Big Apple were up 20 basis points last week and have increased 6.2% over the past twelve months. New York is the most expensive market in the country by a significant margin as San Francisco rents continue to fall.
  • Washington, D.C., Chicago and San Jose are all in the top 5 markets for rent growth on an annual basis.
  • Like occupancy, the markets with the worst performing rent growth are dealing with new supply hurdles. Las Vegas and Nashville rents fell 40 basis points and 20 basis points respectively last week. Both metros are also in the bottom five for annual rent growth, as NER has fallen by 6.8% in Las Vegas and 3.5% in Nashville.

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