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Rent and Operating Trends – Week of April 3rd 2023

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Rent and Operating Trends – Week of April 3rd 2023

Chris Nebenzahl

Chris Nebenzahl

The U.S. economy passed another hurdle last week, as the final Q4 2022 estimate of GDP showed 2.9% annualized growth. While many economists still believe a recession will hit this year, last week’s report proves that the economy was on strong footing throughout the second half of last year. The focus will shift to Q1 growth, and the first official estimate will be released at the end of April. The Atlanta Fed models GDP in real time through their GDP“Now tracker, and current estimates call for a Q1 growth rate of 1.7 percent annualized.  Treasury rates have retreated in recent days as clarity around monetary policy emerges. The two-year treasury, which hit 5% in early March is down below 4% and the 10-year treasury has fallen roughly 50 basis points in the same time frame. Softening inflation fears, and the ensuing drop in the 10-year treasury rate, is good news for the multifamily transaction market, as some buyers and sellers may be coming closer to reaching acceptable deal terms.

On the operating side, fundamentals improved across the board once again. Nationwide occupancy ticked upward despite new supply additions. Traffic increased as well. New leases signed remained flat however, and thus far in 2023 traffic gains have outpaced leasing gains. As a result, the national closing ratio has fallen to 31.3%.

Key Takeaways – Data as of 04/03/2023

Traffic and Leases:

  • Traffic jumped in all but 3 markets tracked by Radix last week, and nationwide properties are averaging just under 9 tours per property per week.
  • For the first time in months, Dallas and Houston do not rank as the top 2 markets for weekly traffic. Chicago recently overtook the Texas markets, with properties across the Windy City averaging 12 tours per property.
  • Nashville had a great week last week from a traffic perspective as tours increased on average by 0.8 per property.
  • Nationwide, leasing was flat, but many markets saw the number of new leases signed rise in the last week of March. Nashville led all markets in new leasing as well. Minneapolis, Salt Lake City, and Denver also had strong weeks on the leasing front.

    Occupancy and ATR:

  • Occupancy increased at the national level and crossed back above 94%. As the metric that has underperformed the most for the past 18 months, rising occupancy is a welcome sight to many operators.
  • Minneapolis topped the rankings last week, with occupancy rising 14 basis points. San Diego, Phoenix, and Denver also posted strong occupancy gains of at least 5 basis points.
  • However, ATR increased modestly nationwide as new deliveries continue to weigh on availability not just in lease up properties but across the entire apartment stock.

    Net Effective Rent:

  • NER increased 10 basis points nationwide last week as rents have begun to increase steadily. Despite the slowdown, same store NER growth remains positive, as rents are up 2% from this time last year.
  • Chicago continues to lead markets in NER growth, as average rents increased 40 basis points. Baltimore, New York, Raleigh, and San Diego also had a strong week, as NER grew 30 basis points in each market.
  • On an annual basis, Charleston leads all markets with NER growth of 8.1%.
  • While NER in most markets is increasing, Salt Lake City and Jacksonville lagged the nation with the largest NER declines last week. Rents are mired in a slog in both markets as annual NER growth is 0% in Salt Lake City and -0.3% in Jacksonville.

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