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Rent and Operating Trends – Week of June 25th 2023

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Rent and Operating Trends – Week of June 25th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

As we approach the end of the second quarter there will be two key economic indicators released this week. The final estimate of Q1 GDP will be released on Thursday. First quarter GDP had initially been reported at a 1.1% growth rate but was revised upward to 1.3%. Many economists have been predicting a recession but have not given a hard timeframe on when the recession will begin. A weak final estimate of Q1 GDP could portend a downturn in the coming quarters. The May Personal Consumption Expenditures Index will be released on Friday. As the Fed’s preferred measure of inflation, this reading will give us a decent sense of where the Fed is heading at its upcoming meeting in late July. An annual inflation number in the 4-5% range will likely lead the Fed to raise rates another quarter percent.

Property performance was mostly unchanged through mid-June, although occupancy nationwide continues to fall. Traffic and leasing were flat last week, while NER grew modestly. We have yet to see a strong leasing season materialize this year, and I would expect to see fundamentals beginning to soften over the next six to eight weeks. A normal seasonal slowdown in the late third and fourth quarters would leave national apartment fundamentals in negative territory on an annual basis.

Key Takeaways – Data as of 06/25/2023

Traffic and Leases:

  • The national conversion ratio has remained fairly steady, coming in at 32.6% last week.

  • Los Angeles and Salt Lake City, two markets that have seen their traffic numbers fall over the past twelve months, led all markets in traffic growth last week. Both metros lag the national average by about two tours per property.

  • Dallas and Houston have regained the top two spots in our overall traffic rankings, with each Texas metro averaging more than 11.5 tours per property.

  • Leasing activity also picked up in Salt Lake City. Combined with the strong traffic growth, the uptick in leasing is a welcome site for owners and operators in Salt Lake, as the metro has struggled with oversupply and weak fundamental growth this year.

    Occupancy and ATR:

  • Nationwide occupancy continues to decline, and the national occupancy rate is 94.2%. Compared to this time last year, occupancy has fallen 1.25%.

  • New York, Salt Lake City and San Jose led the nation in occupancy growth last week. New York picked up 10 basis points of occupancy and maintains one of the highest occupancy rates in the country at 95.9%.

  • On the opposite end of the spectrum, Miami lost 21 basis points of occupancy last week. The metro’s occupancy rate is still slightly higher than the national average, but occupancy has been falling consistently in South Florida. Occupancy dropped in all but three Miami submarkets last week.

  • While occupancy continues to decline, the number of units available to rent improved last week. Nationwide, properties are averaging 15 units available to rent over the next 60 days.

  • Western markets Albuquerque, Tucson, San Diego, Seattle and Portland led the nation in ATR, averaging between 10 and 11 units available to rent.

    Net Effective Rent:

  • NER increased 10 basis points nationwide last week, bringing the national average rent up to $1,882.

  • Albuquerque was the fastest growing rent market last week, as NER increased 70 basis points. The New Mexico metro also ranks among the strongest in the nation with 4% year-over-year rent growth.

  • While many operating metrics are flat or declining, NER growth remains strong as 20 of the 33 markets tracked by Radix Research registered growth last week. In fact, 8 markets saw rents grow by at least 30 basis points last week.

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Picture of Chris Nebenzahl
Chris Nebenzahl
Chris Nebenzahl is the Director of Economic Research at Radix, where he oversees all macroeconomic and multifamily market analysis. Chris has 15 years of multifamily experience in data analytics, research, asset management and acquisitions. Prior to his time in the multifamily industry Chris was a portfolio manager at Bank of New York, focusing in the government and commercial fixed income sectors.
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