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Rent and Operating Trends Week of September 4th

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Rent and Operating Trends Week of September 4th

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As the summer unofficially comes to a close, the U.S. economy finds itself in a similar place to where it was when the summer began. Volatility, disparity among economic indicators, and rising interest rates highlight the key aspects of the current economic landscape. And while we have focused mostly on the domestic economy, global market conditions are deteriorating even faster, especially in the Eurozone. European energy markets are in turmoil, as Russia has cut its energy supply to much of Western Europe. In the coming months we will likely see the largest economic impacts of Russia’s invasion of Ukraine, and fallout will dampen the global economy.


While some uncertainty remains, it feels like the U.S. economy may be getting used to a new normal from a growth perspective. The Fed’s transparency in their interest rate outlook and course of action has created an understanding within market players of how the next few months will look. I expect inflation to slowly weaken through the end of this year and into mid-2023. Prices for gas, airline tickets, and other consumer goods have already started to fall, and I anticipate a soft landing as consumer demand slowly declines from post-pandemic highs.


The multifamily industry continues to follow the general economy and is softening in line with historical trends. We have reached the normal period of seasonality following a strong, but typical leasing season. Net effective rent nationwide increased 3.2% from the beginning of March through the end of June and has now stayed flat since the beginning of July. I expect a slight dip in rents over the next six months before another seasonal growth cycle begins.

Key Takeaways – Data as of 09/04/2022


Traffic and Leases:


  • Traffic and leasing activity was mostly unchanged last week. The conversion ratio nationwide has stabilized around 30%.
  • While Jacksonville and Tampa apartment fundamentals have softened significantly over the past year, their leases signed per week have remained some of the highest in the country. Properties are averaging well above 3 new leases signed per week in the two Florida markets.


Occupancy and Leased:


  • Occupancy and leased percentages were also mostly flat last week. Nationwide occupancy ticked up 1 basis point, while the national leased percentage fell 5 basis points.
  • While occupancy and leased percentages have been falling, most markets maintain decent rates. Only 7 of the top 30 markets have occupancy below 95% as we head into the slower season for multifamily performance.


Net Effective Rent:


  • NER fell another 10 basis points, nationwide, last week and I expect that trend to continue. On an annual basis, NER growth has decelerated to 4%.
  • Two and three bedroom unit rents have fallen the fastest, as these floorplans have posted 2.1% and 3.0% annual growth respectively. Studios on the other hand have continued to perform well, with rents up 7.4% nationwide year-over-year.
  • San Diego studio rents are up an astounding 23% compared to this time last year, as the southern California metro has become one of the most popular destinations for single remote workers. With studios renting for nearly $2,500 per month, San Diego rents for that unit type now rival San Jose, Boston, San Francisco and LA.


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