June Multifamily Rents Hit Biggest One-Month Increase In Years

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The Editors's picture
June Multifamily Rents Hit Biggest One-Month Increase In Years

U.S. multifamily rents jumped $12 in June, posting the largest one-month increase in several years, according to a release from Yardi-Matrix.

Average rents rose $12 to $1,349, a 2.7% increase on a year-over-year basis, in the 121 markets the survey covered.

June’s heady performance was due to several factors. In part it was seasonal, as rent growth tends to be stronger in the spring. Another factor is that there was a rebound in markets such as Seattle, Denver, Boston and San Francisco, which in recent months had fallen off their once-robust pace. Those were among the metros with healthy gains in the trailing three-month survey, which tracked second quarter results, according to the release.

 Also noteworthy is the on-going strength of some secondary and tertiary metros, such as Reno, Tacoma and Colorado Springs. Reno is benefiting from the influx of economic activity created by Tesla’s huge battery plant, while Tacoma and Colorado Springs are reaping the spillover effect from nearby Seattle and Denver, Yardi-Matrix said in the report.

Some comfort in multifamily rents increase

The strong showing should provide some comfort to the market.

Although fundamentals have continued to be healthy, with no let-up in demand in most metros and occupancy rates relatively high, the long period of a sliding rate of rent growth led to worries that the market was on track for a sustained correction.

 But there appears to be some steam left in the rally, according to the release.

Multifamily rents increase in June biggest single month jump in years

Occupancy rates could fall in downtown Portland

Overall occupancy of stabilized properties was 95.6% nationwide as of June, unchanged from May and down 20 basis points year-over-year. Last year saw the highest rate of completions in this cycle, and the market expects another peak to be reached in 2017.

 As new supply is absorbed, occupancy rates will likely fall, especially in construction-heavy submarkets such as downtown Portland and Hyde Park in Austin, which have seen occupancy decline by more than 3% in the past year.

Second half of year historically slower

However, if recent history holds, growth will be much slower in the second half. In each of the last five years, rent increases slowed after the mid-year mark.

We expect the second half of 2017 to follow the same pattern, and not just because of the seasonality of multifamily rents. The factors that are causing the deceleration—rent gains will revert to historical levels and be more in line with wage growth, and the increases in supply in 2017 and 2018 will reduce occupancy levels in many metros—have not changed. Occupancy rates are falling significantly in high-supply markets—as much as 80 basis points year-over-year in Portland and Austin.

About Yardi-Matrix

The Yardi Matrix apartment information service is a high-performance system with the sole function of supporting the commercial apartment industry’s dominant participants. The company's services monitor the 50+ unit apartment universe from the property level to the submarket/market level in a form unique within the commercial apartment information industry.

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