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Rent and Operating Trends – Week of June 4th 2023

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Rent and Operating Trends – Week of June 4th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The U.S. economy, specifically the employment market, remains stalwart as growth continued in May. Roughly 340,000 new jobs were added last month, giving many economists hope that we may avoid a recession this year. Despite continuously rising interest rates and persistent inflation, the employment market has added jobs in each of the past 29 months. Over the last 12 months, roughly 3.8 million jobs have been added. While some sectors like tech and media continue to make headlines with layoffs, the broader economy is adding jobs in almost every sector. Wage growth is also increasing, and average hourly wages are up 4.3% year-over-year. While this level of growth is above the long-term average, it does not represent extreme wage inflation. Continued wage growth should help residents handle increased rents and housing expenses. Last week’s jobs report was not all rosy, as the unemployment rate increased 30 basis points. However, with overall unemployment at 3.7%, and new job formations north of 300,000, there is little concern as to the general state of our job market.

Multifamily operating fundamentals remained mostly flat last week, a trend that has been presenting itself over the past few weeks. May and June are traditionally strong months for fundamental growth, yet the general stability may indicate a shorter prime rental season this year. Softness continues in markets heavily impacted by new supply, and the overall slowdown in the national figures may be an indication of a weaker than expected year for multifamily.

Key Takeaways – Data as of 06/04/2023

Traffic and Leases:

  • Traffic and leases were both unchanged at the national level last week, remaining slightly below their June 2022 levels.

  • The national conversion ratio is 32.5%.

  • Southeast markets Jacksonville, Charleston and Charlotte saw the largest increases in traffic, with each market picking up roughly a half tour per property last week. Jacksonville also led the nation in new lease growth last week, and the North Florida market is averaging 3.5 new leases signed per property each week.

  • West Coast markets San Francisco, Portland and Seattle are struggling to sign leases, as properties are averaging only 1.7-1.8 new leases per week. While occupancy and rent growth has been stable, these markets are struggling with demand, and are forced to rely on their existing population to drive their apartment market.

    Occupancy and ATR:

  • Occupancy rose 2 basis points nationwide but remains rangebound around 94.3%.

  • Like traffic, Charlotte and Charleston led last week’s occupancy growth rankings, with the markets picking up 15 basis points and 13 basis points of occupancy, respectively. Both metros maintain overall occupancy rates around 94%, but the increases indicate continued demand in the southeast.

  • ATR was mostly unchanged last week, and the average property nationwide has 19 units available to rent in the next 60 days.

  • Facing mounting lease up pressure and the continued onslaught of new supply, Austin leads the nation in ATR. The average property in the Texas capital has 26 apartment units available to rent.

    Net Effective Rent:

  • Nationwide NER increased 10 basis points last week.

  • Chicago maintains its torrid pace, as rents accelerated 1.4% last week alone. Rents are now up 5.5% year-over-year and the recovery in Chicago’s rental market is one of the biggest stories in the multifamily industry this year.

  • Albuquerque and Riverside, CA, two smaller markets in the southwest, also posted strong growth last week as NER rose 40 basis points in both metros.

  • Rent declines were heaviest in sunbelt markets with ample new supply including Nashville, San Antonio, Jacksonville, Phoenix and Austin, a trend that will likely continue at least through the end of this year.

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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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