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Rent and Operating Trends Week of October 2nd

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Rent and Operating Trends Week of October 2nd



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The third quarter ended on a rather bleak note, as the final estimate of Q2 GDP showed negative growth once again. While we have known that the economy has been in a technical recession for some time, last week’s read serves as confirmation of the shrinking economy. And while we won’t likely see a drastic decline in growth this quarter, I anticipate another modestly negative growth rate when the first estimate of Q3 GDP is released at the end of October. All signs continue to point to a slow grind, as interest rates rise, and global demand appears to weaken.


Multifamily fundamentals continue to soften, and nationwide occupancy fell below 95% for the first time since April, 2021. New York is the only metro in the top 30 to have a higher occupancy rate than at this time last year. Rents are also pulling back significantly, as most markets are posting rent declines on a week-over-week basis. The only silver lining remains in the leading indicators traffic and leasing, as flat performance on a weekly basis and slight increases on an annual basis provides some optimism that the multifamily market is approaching a soft landing.

Key Takeaways – Data as of 10/02/2022


Traffic and Leases:


  • Traffic increased in a few warmer weather markets last week, as the cooler temperatures have had little effect on demand in San Diego, Houston, and Los Angeles. New apartment tours in these markets are also up on an annual basis, and in San Diego, apartments are averaging 1.5 more tours than they were at this time last year.
  • We recently analyzed the relationship between both traffic and occupancy and traffic and NER growth. There is about a 4 month lag between changes in traffic and changes in occupancy and roughly a 6 month lag between traffic and rent growth. Check out the new Radix Chart of the Week series on our LinkedIn page and website for more details.
  • Leases were mostly flat last week, with the national average remaining unchanged from the week before. Tucson, Portland and Riverside recorded modest increases in leasing activity, while many markets on the eastern seaboard saw new leases decline on a weekly basis.


Occupancy and Leased:


  • Nationwide occupancy fell 8 basis points to 94.96%, its lowest level in a year and a half.
  • The biggest drops were seen in Las Vegas and Tampa. The data from last week was collected throughout the week and likely does not account for any impacts from Hurricane Ian.
  • Nearly half of the top 30 markets have occupancy rates below 95%. Most of these markets are in the sunbelt, which has traditionally maintained softer occupancy rates than coastal gateway markets, however the decline in occupancy over the past 12 months still bares monitoring. Many markets with falling occupancy are the same markets whose rent has decelerated the fastest since late last year.


Net Effective Rent:


  • Nationwide NER fell 10 basis points last week and will likely fall below $1,900 in the coming weeks, after posting a record high of $1,930 in late July.
  • Rents are falling the fastest in Orlando, Tampa, San Francisco and Riverside, where the average rent fell 50 basis points in each market last week.
  • San Francisco remains one of the slowest growing markets in the country, with annual rent growth of only 1.1%. However, Orlando and Tampa have seen their annual rent growth slow down precipitously from the mid to high 20% range down to roughly 5 or 6% in a matter of months.


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