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Rent and Operating Trends Week of September 11th

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Rent and Operating Trends Week of September 11th



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Economic volatility continues to confuse market participants as new data fails to provide a consistent message on the health of the overall economy. A robust employment market set against declining GDP and high inflation has most stock and bond analysts scratching their heads. The Fed has made it clear they will maintain significant interest rate increases, and as a result equity markets have continued their recent sell off. The S&P 500 is down roughly 4% over the past month and roughly 12% from its recent high at the end of March. Multifamily REITs have performed even worse, as most REITs are down between 5% and 10% over the past month.


U.S. multifamily fundamentals continue to cool as the we approach the fall. For the first time since the early days of COVID-19, traffic, leases signed, occupancy, leased percentage and NER were negative nationwide level last week. Further signs of a cooling multifamily market can be seen in the annual rent growth figures, as Las Vegas and Jacksonville both posted negative NER growth on a year-over-year basis. Overall nationwide NER growth has decelerated to 3.1% year-over-year. I expect weekly performance to soften further, while annual performance will likely flatten in the coming months.

Key Takeaways – Data as of 09/11/2022


Traffic and Leases:


  • Traffic nationwide dipped below 8 tours per property last week for the first time since February. 
  • Texas metros including Dallas and Houston remained the most active from a traffic perspective, as each metro averaged more than 10 tours per property last week. However, even in these heavily trafficked areas, tours are slowing down from a few months ago.
  • Leases signed also fell last week, as fewer tenants are committing to new apartment units.
  • Of the top 30 metros, only Jacksonville, Salt Lake City, and Charleston saw leasing activity increase on a weekly basis.


Occupancy and Leased:


  • The national occupancy rate fell 2 basis points last week and currently sits at 95.2%.
  • Las Vegas, a market that has been struggling for much of the past year, has a market-wide occupancy rate of 93.9%, the lowest of any top 30 metro. Occupancy in Las Vegas has fallen 3 percentage points over the past 12 months.
  • Leased percentages are falling as well, as the national leased percentage dropped 9 basis points last week. The gap between leased percentage and occupancy has started to narrow as fewer new leases are signed each week.


Net Effective Rent:


  • NER declined 10 basis points nationwide last week and has fallen 50 basis points over the last six weeks. Over the same six weeks, revenue per available unit has dropped 60 basis points, reflecting the declining occupancy on top of falling rents.
  • As a result of softening fundamentals, concessions have also increased. Nationwide, concessions were up 8.4% last week.
  • Austin, Las Vegas, Riverside and Phoenix, all markets that have outperformed their larger peers in recent months, led the nation last week in concession increases, as concessions grew at least 40% in each market.
  • San Francisco and San Jose maintain some of the highest average concessions in the nation at $114 and $48 respectively. Even given the relative cost of rent in the Bay Area, these two markets have some of the highest concessions nationwide, as demand in the tech heavy markets continues to struggle due to limited return to office mandates for many tech firms.


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