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Rent And Operating Trends – Week Of March 17th 2024

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Rent And Operating Trends – Week Of March 17th 2024

Picture of Chris Nebenzahl

Chris Nebenzahl

Domestic migration and population growth are key drivers of multifamily demand, and the Census Bureau released its 2023 county level population statistics last week. These data provide insight into which local areas are experiencing the fastest growth and which areas are struggling with outmigration. Overall, many of the same trends we have experienced in the past few years have continued, with sunbelt counties in Florida, Texas, Arizona, and the Carolinas taking the lion’s share of growth. Counties from large gateway markets in Los Angeles, Chicago and New York led the way for outmigration. Yet the pace of growth and the pace of decline slowed in 2023 from previous years. Given the severity of the new supply pipeline in the south, slowing demand growth will likely extend the lease up timelines and recovery for many of these markets. Conversely, slower population declines in gateway markets, set against a landscape of relatively limited supply may lead to continued outperformance in places like Chicago. We will be covering the domestic migration and population growth data in further detail in future reports and social media posts.

The multifamily industry continues its slow and steady growth as we near the end of the first quarter. Once again, all key indicators were positive or flat last week, led by traffic and occupancy, which both increased modestly. With the job market continuing to drive the economy forward at a faster rate than many economists expected, housing demand should remain elevated. Multifamily demand will get an additional boost from mortgage interest rates that remain high, which pushes many consumers toward renting as they consider the financial implications of the rent versus buy decision.

Key Takeaways – Data as of 3/17/2024

Traffic and Leases:

  • Traffic increased by two tenths of a tour per property nationwide last week as the prime rental season kicks into gear. San Diego and Reno led the nation picking up 0.9 tours per property last week. Reno’s demand resurgence is in full force as traffic has nearly doubled since last year. As job growth and corporate expansion continues in northern Nevada, companies have been encouraging housing development as supply has been limited.
  • Small markets were among the weakest performing traffic markets last week. Memphis and Tucson lost nearly a full tour per property compared to the week prior, and both markets have absolute traffic numbers well below the national average.
  • Leasing at the national level was flat last week and the average property across the country is signing 2.5 new leases per week.
  • Huntsville, AL led all markets picking up a half lease per property last week compared to the prior week, however the northern Alabama market still has a long way to go in its recovery. Colorado Springs is a market with a lot of similarities to Huntsville from an economic and demographic perspective. It ranked second in our leasing growth rankings last week and is signing almost three leases per property each week. It boasts one of the higher closing ratios in the country at 42%.

Occupancy and ATR:

  • National occupancy added another basis point last week and is now only 52 basis points below its level from a year ago.
  • Reno led all markets, adding 25 basis points of occupancy last week alone. Its market occupancy rate is nearing 95% after adding 93 basis points in the past year, which also leads all markets tracked by Radix Research.
  • 26 markets reported occupancy growth last week, a strong trend as we enter the leasing season. I expect most markets to gain occupancy over the next three to six months as demand accelerates. However, the pace of demand acceleration will be important to watch in the second quarter. The question many apartment operators have on their mind is will markets gain enough occupancy and see rents grow fast enough to overcome the likely seasonal slowdown at the end of the year?

Net Effective Rent:

  • Rents were flat last week at the national level and remain down 1.5% on a year-over-year basis.
  • Columbus, OH posted the strongest net effective rent growth last week, as rents increased 1.3%. The Ohio capital is one of a number of midwestern markets posting strong and steady performance as demand remains firm. Limited and strategically placed development has not put significant strain on midwestern metros.
  • Nashville, however, remains the posterchild of oversupply and as a result, rents fell 60 basis points last week, the fastest of any market tracked by Radix Research. Concessions continue to rise, and operators are digging deep on discounts and promotions to lease up new properties. Traffic and leasing are in line with national averages, but the overall performance is weak against the glut of development.

Revenue Per Available Unit:

  • RevPAU was also flat last week but is improving on a year-over-year basis from late 2023. Annual RevPAU is down only 1.9% fueled by improving occupancy and steady rent performance nationwide.
  • 18 markets maintain RevPAU growth on an annual basis, led by Midland, TX. While the oil heavy metro is far above its peers in RevPAU growth based on the strength of the energy market, the rest of the markets in positive territory are mostly in the northeast, southwest and Midwest. That trend may be starting to change as some smaller Carolina and Virginia markets begin reporting growth.

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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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