Rent and Operating Trends – Week of September 17th 2023
The U.S. economy awaits another Fed meeting, scheduled for Tuesday and Wednesday of this week. Most economists predict that the Fed will hold rates steady at the upcoming meeting, but it is far from an indication that the monetary tightening cycle has concluded. There is still belief that the Fed could raise one more time in 2023, and recent inflation numbers that have come in higher than expected could provide evidence to the Fed that more monetary tightening is needed.
Labor market conditions remain very tight despite the slowdown in new job formations seen in recent months. As of July there were nearly 9,000,000 job openings across the country, and the ratio of unemployed to the number of jobs available was 0.7, meaning that there are more job openings than there are people looking for work. The tight labor market is impacting multifamily as well, as on-site teams, maintenance technicians, and property managers are in high demand. Not only is the job market for these positions scarce, but as the industry adds new supply, the competition for high quality employees will continue to increase.
All multifamily indicators fell last week for the second straight week. With new supply delivering across the nation and multifamily demand softening as we approach what has traditionally been the weakest time of year for multifamily, owners and operators should prepare for a continued slowdown in fundamentals.
Key Takeaways – Data as of 09/17/2023
Traffic and Leases:
- Traffic has dropped off quickly in recent weeks after staying around 8.5 tours per property for much of the summer. As of last week, the average property nationwide had 7.6 tours.
- Leasing has also fallen, with the average property signing 2.5 new leases per week.
- Charlotte, a market already facing significant new supply pressure, saw the largest weekly decline in traffic last week. The North Carolina metro still averages nearly a tour greater than the national average, but traffic is down on both a week-over-week and year-over-year basis.
- Leasing activity fell the most in Chicago. One of the best performing markets for the first half of 2023, Chicago’s apartment market has retreated, in line with other peer markets in recent weeks.
Occupancy and ATR:
- Nationwide occupancy fell another three basis points last week, and the national occupancy rate is 94.21%.
- Markets with high supply, especially in the southeast and southwest have average occupancy well below 94%.
- Atlanta currently maintains the lowest occupancy in the nation with an average occupancy rate of 92.91%. Demand in Atlanta remains steady, as average traffic is more than 1.5 tours per week greater than the national average. Yet all the new supply in both urban and suburban Atlanta has put a significant strain on occupancy.
Net Effective Rent:
- Net effective rents fell 10 basis points last week. The national average net effective rent is $1,870.
- Austin rents fell 40 basis points last week, leading the nation in rent declines. The Central Texas MSA has seen net effective rents fall 6.4% over the past year. When adding in the effects of occupancy decline, the average revenue per available unit in Austin has fallen 7.6% in the last 12 months.