Rent and Operating Trends Week of April 24

All eyes on Wall Street this week are focused on big tech earnings, as companies like Apple and Amazon report for the first time since interest rates spiked. The Fed has made it clear it will raise interest rates rapidly to curb inflation. While interest rate hikes may not have a direct impact on consumer spending, the knock on effects of a slower economy should eventually impact the tech giants. This week’s earnings may be the first glimpse we get into that slow down.

On the multifamily side, apartment REITs have done well over the past few months despite the overall sell off in the equity markets. As major indices dropped between 5-10%, most residential REITS have remained flat or slightly positive. The multifamily industry appears poised to continue its steady growth, and fundamentals have remained strong. Increased borrowing costs will likely make deals harder to pencil, but the underlying demand fundamentals should keep investment capital flowing into the sector.

Key Takeaways – Data as of 4/24/2022:

Traffic and Leases:

• Traffic and Leases were mostly unchanged last week at the national level. Properties are recording roughly 9 tours per week and converting about a third of tours into leases. The traffic and leases data remains below last year’s record figures, but the overall numbers remain strong.
• Atlanta and Tampa continue to see strong traffic growth, with both markets averaging more than 11 tours per week.
• Texas markets lead the way in leasing with all four major Texas markets in the top 10 nationwide for new leases signed last week.

Occupancy and Leased Percentage:

• Occupancy was mostly flat last week nationally, while the leased percentage ticked up slightly. Occupancy and leased percentages remain higher than they were a year ago, and the annual change is worth watching. If occupancy and leased percentages can remain above or even equal to 2021 levels as we move through the spring and summer, that will bode very well for long term apartment demand.
• Western markets including Salt Lake City, San Diego, and Riverside maintain the highest occupancies nationwide, as demand remains elevated for secondary tech markets in proximity to large gateway markets.
• Salt Lake’s leased percentage sits at a staggering 98.0% as the market has absorbed new supply very well, and demand continues to outpace housing growth. Tech companies and employees alike are finding Salt Lake to be a strong secondary market with ample lifestyle attractions that continue to draw migrants from all over the west.

Net Effective Rent:

• NER increased another 30 basis points nationwide last week as strong growth continues through the prime rental season.
• Tampa, Miami and Orlando had another good week with average NER increasing 30 basis points in each market. The Florida markets are the three fastest growing markets on an annual basis as rent growth in the sunshine state dominates the country.
• San Antonio was the fastest growing market last week with NER up 60 basis points. San Antonio’s annual rent growth is the second fastest in Texas behind tech heavy Austin, and the I-35 corridor through central Texas continues to shine as one of the best regions in the country for rent growth.