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Rent And Operating Trends – Week Of March 31st 2024

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Rent And Operating Trends – Week Of March 31st 2024

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Chris Nebenzahl

The U.S. economy ended the first quarter on strong footing with most economic indicators reporting growth. The final estimate of Q4 GDP showed the economy expanded at a 3.4% annualized rate, bringing the 2023 full year growth to 3.1%. Despite restrictive monetary policy, economic growth continues to outperform. Job growth remains strong, and inflation continues to moderate. The equity markets are doing well, as the S&P 500 is up more than 10% so far this year. As American consumers and businesses continue to adapt to life in a new and higher interest rate paradigm, the economy has not yet shown signs of deteriorating.

Multifamily fundamentals continue to increase as we move into the second quarter, however, the pace of growth is not fast enough to keep up with last year’s results. All key indicators remain negative on a year-over-year basis at the national level. Furthermore, the divergence between markets with strong performance and markets searching for a bottom continues to widen as the effect of new supply weighs heavily on key markets in the sunbelt.

Key Takeaways – Data as of 3/31/2024

Traffic and Leases:

  • Traffic and leasing were relatively flat last week but both remain below their 2023 levels at the beginning of April. Traffic nationwide reached 8 tours per week, as the leasing season begins, and renters increase their apartment searches.
  • Virginia Beach led all markets, picking up nearly a full tour per property last week. The Mid-Atlantic MSA is averaging 8.8 tours per property as of last week.
  • In total, 19 markets saw an increase in traffic last week. However, on an annual basis, only 7 markets have higher traffic levels than a year ago.
  • Leasing activity is showing a similar trend, as several markets are experiencing weekly leasing increases, yet only 10 markets have leasing activity that is higher than last year.


Occupancy and ATR:

  • After a difficult 30 month stretch during which the national rate fell consistently, occupancy has reversed course so far in 2024. Nationwide occupancy gained 4 basis points last week, and although it remains 46 basis points below its level from a year ago, the steady growth throughout the first quarter is a good sign.
  • While traffic is struggling compared to last year, occupancy is holding its own, which provides further evidence that renewals are increasing, and residents are staying put.
  • Minneapolis saw the biggest boost to occupancy last week, as its market occupancy rate gained 21 basis points. 7 markets nationwide saw occupancy grow by at least 10 basis points last week.
  • Despite strong traffic data, Virginia Beach had the largest occupancy decline last week. However, market occupancy remains at 95%, putting it in the top 10 for highest occupancy.
  • Charleston also had a challenging week last week, losing 9 basis points of occupancy. The coastal South Carolina metro was one of the best performing markets last year, however recent construction starts have led their new supply pipeline to nearly double in the past 9 months. I’ll be watching this market closely to see if its performance falls the way its southeastern peer markets did as supply increased, or if outsized demand will lead to stable property fundamentals.


Net Effective Rent:

  • Net effective rent nationwide increased 10 basis points last week, but the annual decline increased to 1.8%. This marks the first time in several months where the decline in annual rent performance widened. Similar to other metrics, the modest short-term growth is not enough to overcome the annual slowdown we’ve been witnessing in multifamily.
  • Midland, TX continues its hot streak both in weekly and annual rent gains. Rents are up more than 10% from this time last year.
  • New York had a strong week last week, as rents increased 70 basis points. Annual rent growth in the Big Apple is still negative, but steadily improving.
  • Sacramento rents saw the biggest drop last week, falling 1%. The California capital remains in a good position however, as annual rent growth remains strong, occupancy is among the highest in the country, and its closing ratio is steady.

Revenue Per Available Unit:

  • RevPAU also increased modestly last week but remains 2.2% below its national level from last year.
  • 17 of the 45 markets tracked by Radix Research have positive annual RevPAU growth, while the other 28 are in negative territory.
  • Supply remains the most apparent reason for underperformance as the metros with RevPAU declines of 5% or more all have significant new supply challenges. In total, 10 markets have seen RevPAU decline by 5% or more since last year. By contrast, only Midland, TX has experienced RevPAU growth of more than 5%.

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