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Rent and Operating Trends – Week of October 1st 2023

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Rent and Operating Trends – Week of October 1st 2023

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Chris Nebenzahl

We are excited to announce some new changes to the Rent and Operating Trends Report beginning this week. Revenue per Available Unit (RevPAU) is a comprehensive apartment performance metric that combines net effective rent with occupancy to identify the total potential revenue given the number of operational units in a property, submarket or MSA. As property fundamentals have changed rapidly over the past 12 months, this metric is a single data point that captures the impact of two of the most important performance drivers in our industry and will give a clear overall picture of how the apartment market is performing as we navigate the turbulent waters ahead. We’ve also switched our net effective rent figures in this report to show our same store sample. We are thrilled that Radix’s data set is growing rapidly, and in light of the new properties being added to the sample each week, we want to show a comparison on a same-store basis for net effective rent. RevPAU will also be reported on a same store basis in these weekly reports. Our research platform continues to allow for both same store analysis and total sample analysis. Please reach out if you have any questions regarding the changes, we are excited to release these new enhancements as we move into Q4.

The personal consumption expenditures index indicated a modest uptick in inflation, as the August report showed prices rising 3.5% from last year. A slight increase will likely not be enough for the Fed to change course on interest rate policy, and we are still likely to see one more increase either in November or December. The 10-year Treasury rate continues its swift climb, and as of the beginning of October, the 10-year yielded 4.63%.

Multifamily performance continues to soften. Occupancy fell again last week and is testing the 94% threshold nationwide. Rents are down in most markets, and the declines in the worst performing markets are far more extreme than the modest increases in the few MSAs still seeing growth.

Key Takeaways – Data as of 10/01/2023

Traffic and Leases:

  • Traffic nationwide dipped to 7.3 tours per property last week, while leasing fell to 2.4 new leases signed.
  • There was modest growth ins San Jose, Las Vegas and San Antonio last week, which is notable especially for Las Vegas and San Antonio. Both markets are among the weakest performing markets from a rent and occupancy perspective, so any uptick in traffic will be warmly welcomed in those markets. Las Vegas traffic is above the national average, while San Antonio’s is just below, yet weekly and annual traffic in San Antonio are both up.
  • Leasing is down in almost all markets nationwide as we enter the fourth quarter. Traditionally Q4 is the slowest period for leasing each year.

Occupancy and ATR:

  • Nationwide occupancy fell 4 basis points to 94.1%.
  • All markets maintain lower occupancy rates than they did a year ago. Seattle and Charleston have the best annual occupancy performance, with rates down only four and five basis points respectively.
  • Yet Atlanta and San Antonio occupancy rates are down more than 1.5% in the last 12 months.
  • ATR remained unchanged from last week, and the average property has 15 units available to rent over the next 60 days.

Net Effective Rent:

  • Same store net effective rent fell another 10 basis points last week and rents are down 1.7% nationwide since last year.
  • Nashville and Los Angeles saw slight rent increases last week, but both maintain negative annual growth rates. Nashville rents are down nearly 4% year-over-year.
  • Austin, Salt Lake City and Las Vegas continue to lag all markets, as rents have fallen more than 5% in each market since last year. As of last week, 9 of the 33 markets tracked by Radix Research registered rent declines of 4% or more.

Revenue Per Available Unit:

  • With both rents and occupancy rates falling, it’s no surprise that RevPAU is down. Nationwide, same store RevPAU has fallen 2.5%.
  • Markets that are already struggling with supply pressure like Austin, Salt Lake City and Las Vegas, are feeling the impact more intensely as RevPAU has fallen 6.7% or more in each market.
  • Yet, the metric works in both ways, and markets like Boston and Charleston continue to report strong results. Both markets are among the leaders in occupancy change and rent growth and as such recorded annual increases in RevPAU of 2.0% and 3.4% respectively last week.

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