Rent and Operating Trends – Week of August 20th 2023

Key Takeaways – Data as of 08/20/2023

Traffic and Leases:

• Nationwide, properties are averaging 8.3 tours per property and 2.8 new leases signed per week. Average tours have dropped by roughly a half tour per property since the June peak, but new leasing has remained near this year’s high-water mark. As such, the national conversion ratio has inched upward to 34%.

• Despite its recent rent declines, Riverside, CA maintains the strongest conversion ratio in the nation at 45%. Traffic is well below the national average in the Inland Empire, but new leases are above many peer markets and the country.

• Austin also maintains strong leasing activity. Traffic in the Texas Capital trails that in Dallas and Houston, but leasing is very similar. Austin’s leasing efficiency and conversion ratio is among the highest in the nation.

Occupancy and ATR:

• Nationwide occupancy is 94.25%. While 95% is often used as the benchmark occupancy rate in our industry, the long term national average occupancy is around 94.5%. In the years preceding COVID-19, when new development was beginning to accelerate, the average occupancy rate regularly fluctuated between 94% and 95%.

• Small markets in the Southwest performed well last week, as Albuquerque, Colorado Springs and Salt Lake City took the top three spots in our occupancy growth rankings. Each market improved their occupancy by at least 17 basis points last week. This is meaningful in these markets as they have been some of the hardest hit from an occupancy perspective. Salt Lake occupancy is down 2.2% year-over-year and Albuquerque has lost 1.2% in the past 12 months. Colorado Springs occupancy rate is below 94%.

Net Effective Rent:

• Net effective rent fell 10 basis points at the national level last week. Annual growth fell to -1.5% as rents continue to retreat from 2022 highs.

• While the Southwest is gaining occupancy in recent weeks, rent growth is still struggling. The top 5 markets with the largest annual drop in rents are all in the Southwest.

• At the unit type level, rent growth is diverging, with studios and three bedrooms outperforming one- and two-bedroom units. Annual rents are negative across all unit types at the national level, but one- and two-bedroom rents have fallen almost twice as much as studios and three bedrooms. In larger cities, studios are becoming more sought after as an affordable option to one bedrooms, while in smaller markets and suburban locations, larger units are holding their value and their price.