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Rent and Operating Trends Week of September 25th

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Rent and Operating Trends Week of September 25th

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The U.S. economy is now firmly playing defense as additional fundamental weaknesses emerge. Major equity indices have fallen back into bear market territory, and GDP will likely remain negative when the final estimate of second quarter economic growth is released on Thursday. Job growth and consumer and corporate balance sheets remain a few of the only strengths in the economy, and as inflation persists, consumer balance sheets are getting stretched. While consumer net worth remains at near historic levels, it peaked in the first quarter of 2022 and has been falling since. With the Fed indicating additional severe rate hikes, I expect a continued economic grind for the next few quarters.


While multifamily fundamentals have been softening for a few months, last week may have marked a significant point of stabilization, especially in the leading indicators traffic and leasing. Traffic fell slightly and leasing remained unchanged on a week-over-week basis, however both metrics recorded year-over-year gains for the first time in months. The increases were modest at the national level, however a number of major markets are seeing healthy increases in traffic compared to this time last year. I don’t think this will necessarily mean a new growth cycle is beginning, instead, it could represent a market bottom and an underlying level of continued demand for the foreseeable future.

Key Takeaways – Data as of 09/25/2022


Traffic and Leases:


  • Traffic increased in 7 of the top 30 markets last week, led by Salt Lake City. The Utah capital is also one of the leading markets for traffic growth year-over-year, as tours are up nearly 40% in the last twelve months.
  • Only 12 of the top 30 markets maintain weaker traffic volume this year compared to last year. As a leading indicator, this should bode well for the industry moving forward, as demand remains, even if it doesn’t reach 2021 levels.
  • Leasing activity is also supporting continued demand, as 22 of the top 30 metros have leasing volume equal or greater than they had at this point last year.


Occupancy and Leased:


  • Occupancies nationwide continue to falter, as the national occupancy rate fell another seven basis points last week to 95.04%.
  • All but a handful of markets saw declining occupancy last week, and each of the top 30 markets with the exception of New York and San Jose have seen occupancy decline from this point last year.
  • The national leased percentage fell another 12 basis points as the gap between leased percentage and occupancy continues to narrow.


Net Effective Rent:


  • NER fell 10 basis points last week as the seasonal trend in rent performance returns to normal.
  • Supported by strong demand and traffic, Salt Lake City rents were up 80 basis points last week, the best performance in the nation. Coastal Gateway markets and metros in the mountain west performed well last week, as rents increased in Salt Lake City, Albuquerque, Tucson, Denver, New York, Los Angeles, Boston and Washington D.C.
  • Concessions continue to rise as fundamentals soften. Nationwide concessions increased another 10% last week and 20 of the top 30 markets experienced rising concessions.


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