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Rent and Operating Trends Week of November 20th

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Rent and Operating Trends Week of November 20th



U.S. retail sales accelerated in October after three consecutive months of mixed results. On a seasonally adjusted basis, retail sales increased 1.3%, providing further support that the American consumer remains well capitalized and willing to spend. As Americans continue to spend, prices are likely to keep rising, and thus the Fed is likely to keep hiking interest rates to combat inflation. A number of Fed governors have recently made public remarks indicating continued rate hikes well into next year. The pace and severity of increases may slow down, but rates will likely keep rising until inflation falls back to around 2%.

2022’s multifamily operating slog continues, with all key indicators falling or remaining flat once again last week. Transaction activity has all but dried up, and many owners with loans maturing in the coming months are focusing on building reserves in order to refinance debt. Buyers and sellers remain too far apart for many owners to accept offers at the current time. As a result, hold periods are being extended and owners with maturing debt or expiring rate caps are facing significant issues meeting return expectations. A number of owners have resorted to limiting or pausing investment distributions to create a buffer against interest rates for newly refinanced loans. On the operations side, performance remains steady, but continues to slow.

Key Takeaways – Data as of 11/20/2022

Traffic and Leases:

  • Traffic and leasing once again remained flat last week nationwide.
  • Most markets have seen an increase in traffic on a year-over-year basis, with some of the strongest annual growth occurring in New York and Southern California.
  • New leases signed have also increased from this time last year, with Riverside, CA leading the nation in growth. The average property in the Inland Empire is signing an additional full lease per week compared to 2021.

Occupancy and Leased:

  • Occupancy continues to fall at the national level, dropping another 5 basis points last week. On an annual basis, nationwide occupancy is down 1.38%.
  • The national leased percentage is also falling but has maintained a spread to occupancy of roughly 1% for a number of months.
  • None of the Radix top 30 markets have a higher occupancy rate than this time last year.
  • In the hardest hit markets, including Las Vegas, Riverside and Phoenix, occupancy has fallen by more than 2.5% over the last 12 months.

Net Effective Rent:

  • All of the Radix top 30 markets registered NER declines last week with the exception of Charleston, where rents remained unchanged.
  • Rents fell the fastest in tech heavy markets including Austin, New York, San Diego, San Jose and Raleigh. As some of the largest tech companies continue downsizing their staff, the impacts will likely be felt in the pricing power of apartment operators in tech focused metros. Once known for having the strongest growth, these markets are positioned to struggle as funding and spending within the tech industry tightens amid greater economic uncertainty.
  • In San Francisco, the largest tech market in the country if not the world, rents have performed so poorly that it now ranks as the 6th most expensive rental market in the country according to Radix data. For context, San Francisco and New York had long been the most expensive markets in the country, far outpacing Boston, LA, San Jose and other markets. Average NER in San Francisco is now $1,000 below that of New York, and it is only the fourth most expensive market in the state of California.


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