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Rent And Operating Trends – Week Of March 3rd 2024

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Rent And Operating Trends – Week Of March 3rd 2024

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Chris Nebenzahl

The U.S. economy remains on firm and stable footing through the early part of 2024. GDP was revised slightly downward last week, but economic growth for the fourth quarter remains well above the long-term average. A few Fed governors will speak this week, highlighted by Chair Powell’s Congressional testimony on Thursday.

We will see the February jobs report on Friday, which will provide further indication on the strength of the labor market after a banner month in January. Multifamily fundamentals posted another strong week as we move into March. As the weather improves across much of the nation, March is typically the first month of the prime leasing season, which tends to last for three to four months.

Apartment performance is growing steadily as we head into leasing season, which is a good sign for most markets. I expect to see steady growth in markets that do not face extreme supply challenges. In those markets battling new supply, I will look for stabilization as a sign that these high demand markets can weather the current storm and emerge strong next year when new deliveries start to slow.

Key Takeaways – Data as of 3/03/2024

Traffic and Leases:

  • Traffic and leasing both picked up marginally last week at the national level and the current closing ratio is 32%.
  • The largest increase in traffic came from Colorado Springs, where touring at the average property grew by nearly a full tour compared to the week prior. Despite low overall traffic, Colorado Springs now registers annual traffic growth, which is a good sign for the tertiary market struggling with new supply. As is the case in many tertiary markets, new supply can have a dramatic impact on existing housing stock, and even if demand remains strong, new deliveries can lead to volatile apartment performance.
  • San Jose, Tucson, and Albuquerque saw traffic decline last week, as some of the hottest 2023 markets may be starting to cool. San Jose and Albuquerque have seen average traffic figures decline over the past year.
  • Worth noting as we enter the prime rental season, the largest traffic declines were relatively soft compared to the largest traffic gains last week.
  • Leasing picked up in many markets last week, led by tertiary markets in the southeast and southwest. Columbia, SC, Midland, TX, and Colorado Springs had the strongest leasing growth in the nation.

Occupancy and ATR:

  • Nationwide occupancy picked up one basis point last week as it continues its slow recovery. While growth was modest, the first two months of 2024 marked a turning point for occupancy, which had been falling each month since it peaked in late 2021.
  • Occupancy gains were also led by tertiary markets, with Reno and Wilmington, NC leading the nation last week. Reno added 15 basis points of occupancy and now boasts an occupancy rate 65 basis points higher than a year before. Its year-over-year occupancy growth is second fastest, trailing only Minneapolis.
  • New York maintains the highest occupancy in the country at 95.8%, but recently three other markets have cracked the 95% threshold. Virginia Beach, San Jose and Sacramento all have market occupancy above 95%.
  • ATR across the country continues to modestly improve and the average property nationwide has 15 units available to rent over the next 60 days.

Net Effective Rent:

  • Rents were flat nationwide last week and remain down 1.5% year-over-year.
  • Reno had a great week from a rent perspective, posting a 1.4% increase in the average net effective rent market wide. The northern Nevada MSA has seen very strong growth in all apartment indicators.
  • Nashville rents increased 40 basis points last week and rents are down only 4.7% from this time last year. Demand remains strong in the Music City as it attempts to fend off the continued onslaught of new supply.
  • Huntsville, AL continues to struggle as rents fell another 80 basis points in the market last week. The northern Alabama market has consistently been the worst performer on both a weekly and annual basis.
  • Baltimore rents cooled off last week, falling 60 basis points. However, the market maintains annual rent growth of 40 basis points, as smaller markets in the mid-Atlantic and northeast continue to outperform the rest of the nation.

Revenue Per Available Unit:

  • RevPAU was also flat last week but is beginning to recover driven by the slow increase in occupancy seen in recent weeks.
  • Given that Reno led the nation in both rent and occupancy growth last week, it is no surprise that it tops our RevPAU rankings.
  • 21 markets registered weekly RevPAU gains last week. As the rental season begins, I expect most markets to begin seeing weekly RevPAU growth. Traffic and leasing will lead the way, but as demand remains strong rent growth and occupancy should soon follow.
  • 2024 performance will not reach the elevated levels we saw a few years ago, but all indicators point toward a healthy and steady year for apartment growth. Aside from oversupplied markets, I expect a good year for fundamental growth.

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