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Rent and Operating Trends – Week of January 15th 2023

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Rent and Operating Trends – Week of January 15th 2023

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As with any economic slowdown it is important to focus equally on both hindsight and foresight in determining how long the volatility will last before a new growth cycle begins. 2023 will likely be a challenging year across the global economy, however, I do not foresee a major downturn, because many of the leading indicators of this slowdown are already starting to reverse course. Inflation has been the key metric driving Fed activity and thus the economic turmoil of the past year. In raising rates to combat inflation, the Fed has actively tried to suppress investment, hiring and rapid growth. With that said, the effect of higher rates has already led to lower inflation, but it has not yet had deleterious effects on the employment market as a whole.

December inflation was negative compared to November, and on an annual basis prices were up 6.5%, compared with annual inflation over 9% in June. All the while, new job formations remain above 200,000 per month, even as some major tech, finance, and real estate firms grab headlines with large layoffs. The Fed has proven that they will be reactionary, and they will likely keep raising rates even as the trend of inflation slows down. This could push us back into recession this year but given that the employment market remains as strong as it is and price growth is already retreating, I anticipate any recession to be shallow. I would expect a new growth cycle to start by the end of this year or early 2024.

Multifamily performance in January continues to be muted as key indicators remain flat or slightly negative in recent weeks. At the national level, occupancy and leased percentages dipped modestly last week, along with NER. New leases signed were flat on a weekly basis, while traffic increased in most markets. Transaction activity fell significantly last year, especially in the second half. However, as interest rates dipped in December and through the first two weeks of January, many owners are refinancing into fixed rate debt and locking lower rates as they expect higher rates over the next 6 months.

Key Takeaways – Data as of 01/15/2023

Traffic and Leases:

  • As a positive sign for the months to come, traffic increased in all but four of the top 30 markets last week.
  • While the most traffic remains concentrated in San Jose and the Texas markets, some smaller markets showed the most improvement last week. Tucson led all markets as traffic jumped by almost a full tour per property last week. Raleigh, Charleston and Jacksonville all saw strong traffic growth as well.
  • New leases signed remained flat nationwide, but a few markets, led by San Diego are showing positive signs that demand is returning to the apartment sector.


  • Occupancy growth is split across the country, as about half of the top 30 markets saw occupancy increase last week, while the other half registered minor declines.
  • Chicago and Boston were some of the biggest winners as occupancy increased more than 10 basis points in each market last week. Both markets however maintain occupancy below 95%, which is a rare occurrence for Gateway markets.
  • Of the top 30 markets, only 4 maintain occupancy above 95%, an indication that as demand has softened the presence of new supply is once again a major factor.

Net Effective Rent:

  • NER dipped 10 basis points last week and nationwide average NER is $1,867.
  • In addition to its occupancy gains, Boston was also one of the fastest growing rent markets last week as average NER popped 60 basis points.
  • Salt Lake City continues its strong performance and is poised for a good year in 2023 as affordability, a talented workforce, business friendly environment and strong lifestyle amenities make the Utah capital an attractive apartment market.

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