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Rent and Operating Trends – Week of February 26th 2023

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Rent and Operating Trends – Week of February 26th 2023



Capital markets remain volatile as the macro economy continues to grind its way forward. Slightly higher than expected inflation numbers from both the CPI and PCE indices have pushed treasury yields higher, with the two-year treasury reaching its highest level in more than 15 years. Last week St. Louis Fed President James Bullard argued for faster rate increases as a way of beating inflation, despite the fact that the Fed has slowed down its interest rate hikes. As a result, equity and bond markets swung wildly as investors sought stability. Through it all, employment has remained strong and steady. Last week, new unemployment claims fell to 192,000, keeping weekly new jobless claims under 200,000 for 5 consecutive weeks. February job creation will be released on Friday, shedding additional light on the state of the employment market in 2023.

Multifamily rent and operating metrics were mostly flat once again in the final week of February. March is traditionally the beginning of the prime rental season, and I expect most fundamentals to begin improving in the coming weeks. Traffic has increased modestly, but new leases signed have yet to rise, keeping the conversion ratio lower than it has been in more than a year.

Key Takeaways – Data as of 02/26/2023

Traffic and Leases:

  • Traffic in Chicago continues to rise, with properties averaging more than 10 tours per property as of last week. The Windy City has been one of the strongest markets in terms of traffic growth this year, as properties were averaging just over 6.5 tours per property in early January. The rapid increase in traffic has also translated into leasing activity, with the average property signing roughly 1 more lease per week compared to 2 months ago.

  • Traffic growth has also been strong in Florida and the mountain states. Tampa, Jacksonville, Denver and Salt Lake all saw strong traffic increases last week.

  • Leasing growth was led by Tampa and Jacksonville as well, and both Florida metros are averaging roughly 3 new leases signed per property per week.

Occupancy and ATR:

  • Nationwide occupancy was unchanged last week, and the national occupancy rate is 94.3%.

  • Most of the top markets tracked by Radix saw occupancy fall last week, however strong gains were seen in Chicago and Nashville, where occupancy increased 9 basis points in each market.

  • Coastal markets maintain the highest occupancy led by New York at 95.9% followed by 4 California markets, all with occupancy above 95%.

  • While Chicago has the highest market-wide ATR, it also has shown significant improvement in recent weeks. It ranks 3rd in the country for largest weekly improvement in ATR and 6th for largest annual improvement in ATR.

Net Effective Rent:

  • NER was flat last week on a national level. Of all key operating metrics, NER typically has the most lag, and I anticipate rents will begin increasing in the spring.

  • Chicago may serve as a model for the rest of the country, as rents have increased $30 since the beginning of January, on the heels of strong traffic, leasing and occupancy growth. Traffic and rents nationwide have been mostly flat since the beginning of the year, but as traffic ramps up, NER will likely follow.

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