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Rent and Operating Trends – Week of May 7th 2023

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Rent and Operating Trends – Week of May 7th 2023

Picture of Chris Nebenzahl

Chris Nebenzahl

The U.S. economy continues its trend of stabilization as we move into May, with job growth remaining the strongest aspect of our nation’s economy. 253,000 new jobs were added across the country last month, and the unemployment rate dropped to a 6 decade low of 3.4%. Wage inflation has endured, but annual wage gains are now averaging 4.4%, a slower pace than seen over the past few years, and a much more sustainable rate as we go forward. Elsewhere in the economy, key metrics are also stabilizing as goods and services inflation trends downward, and the Fed has intimated an end to monetary tightening. While First Republic Bank failed last week, it was swiftly sold to JP Morgan Chase, with limited to no impact on depositors or borrowers from the bank. A soft landing is far from inevitable, yet the strength of the employment market has buoyed the overall economy so well that we will either have slow growth in the coming quarters, or a very mild recession.

Multifamily fundamentals continued their slow climb last week as all indicators tracked by Radix Research either grew or remained flat at the national level. While the growth is modest, it nevertheless reflects the improving state of the apartment industry. Our industry does not move in lock step with the macro economy, especially when looking at metro level multifamily performance, but overall, the slow pace of fundamental growth we are seeing in multifamily may be a precursor of slow but steady growth in the broader economy. The recovery from the Great Financial Crisis was highlighted both by its length and its slow pace. While the recovery lasted longer than any other in the post WWII era, it was also among the slowest, with average annual economic growth rates in the low single digits. The next growth cycle could mimic that recovery in pace and tenure.

Key Takeaways – Data as of 05/07/2023

Traffic and Leases:

  • Traffic rose modestly last week at the national level, and the average property is now recording 8.8 tours per week.

  • Western MSAs Phoenix, San Diego, and San Jose led the weekly growth, with each market averaging nearly a half tour per property more than they did the week before. As another sign of potential strength for a market that has been hit hard in the past year, Phoenix traffic is now up on an annual basis, as well as a weekly and monthly basis.

  • San Jose and Salt Lake City led the nation in new lease growth last week, however both markets remain slightly under the national average for new leases signed per week.

    Occupancy and ATR:

  • Occupancy rose 2 basis points nationwide as it continues to rebound from its recent low set at the beginning of 2023. This year’s growth has been very slow, however, any growth is a positive sign in light of the significant supply delivered each week across the country.

  • New York led the nation once again in occupancy gains last week, and its market-wide occupancy rate is now 96.1%. However, after New York, Charleston, Las Vegas, Salt Lake City and Minneapolis rounded out the top 5 markets for occupancy growth last week. This is important as each of these markets has seen occupancy drop significantly in the past year, and all have current occupancy rates below 94%. Occupancy jumped by at least 17 basis points last week in each market.

    Net Effective Rent:

  • Rent growth trudges onward as net effective rents rose 10 basis points last week nationwide.

  • Chicago rents were up another 40 basis points last week, and on a same store basis, rents have risen almost $100 year-to-date.

  • East coast gateway markets New York, Boston and Miami had the largest drop in rents last week, yet each market maintains steady to strong rent growth on an annual basis. New York and Boston rents are up 5.1% and 3.7% respectively, year-over-year.

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