Marketwired
Apartment Market Strength Continues in Second Quarter With 5% Annual Effective Rent Growth and 95.2% Occupancy
Marketwired

DALLAS, TX--(Marketwired - July 01, 2015) - Annual effective rent growth for United States apartments reached 5.0% for the first time in four years, according to early second quarter 2015 numbers from Axiometrics, the leader in apartment market and student housing research and analysis. Research showed:

  • Average national rent was $1,211 for 2Q15, a $58 increase from the average of $1,153 in 2Q14.

  • Annual effective rent growth rate of 5.0% represented a 4-basis-point (bps) increase from the 4.9% reported in 1Q15 and a 142-bps rise from the 3.6% in 2Q14. The figure is the highest since 2Q11, when rent growth was 5.1%.

  • Quarter-over-quarter effective rent growth rate of 2.7% showed a healthy increase over the 0.9% reported in 1Q15 and equal to the 2Q14 rate.

  • Every metro in Axiometrics' top 50 had positive quarterly effective rent growth for 2Q15, compared to 36 in 1Q15 and 14 in 4Q14. This is a strong indicator of apartment market strength.

  • Occupancy was 95.2% for 2Q15, a 48-bps increase from 94.8% in 1Q15 and an increase from the 94.4% in 2Q14. This past quarter was only the second quarter in which occupancy surpassed 95% since 2001; the other time was 3Q14, when the occupancy rate was 95.1%.

  • 62,403 new apartment units were identified to be delivered nationwide during 2Q15, some 22.5% of the total 277,224 units forecast to come to market in 2015. Last year, 217,555 units were delivered.

"We've been seeing steady 5% rent growth in our monthly reporting, so the quarterly number is right on track. The second quarter is traditionally strong for growth, as school has ended and weather is warmer," said Stephanie McCleskey, vice president of research for Axiometrics. "The drivers of the apartment market -- job growth, population growth, single-family home affordability and propensity toward renting -- are all beneficial to rent and occupancy growth. At this point, affordability could become an issue in some markets, and the high rent-growth levels in other markets are unsustainable."

"Occupancy has historically increased in the second quarter," McCleskey said. "The significance of the 95% milestone is that we consider a market or property functionally full at that level. With record new supply coming to market, the fact that the occupancy rate continues increasing demonstrates the strength of the market."

Western Markets Dominate Annual Rent Growth Top 10 List

While the western United States still has the most robust apartment markets, the Bay Area of Northern California isn't as dominant as it was even three months ago.

Oakland still had the highest annual effective rent growth rate among the Axiometrics top 50 markets, based on number of units, but rent growth in No. 6 San Francisco slowed, dropping it in the standings from its No. 2 spot in 1Q15. San Jose remained No. 4 despite a slight decline in the rent-growth rate. Both markets are still extremely strong, but have moderated somewhat.

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