Axiometrics Reports Apartment Market Delivers Strongest Rent Growth Since May 2011

Thu, 2012-03-29

DALLAS, Mar 28, 2012 (BUSINESS WIRE) -- In its latest research, Axiometrics Inc., a provider of data and advisory services on the apartment market, reports that sequential rent growth in February 2012 was the highest it has been since June 2011, with effective rent (rent net of concessions) increasing by 0.66% from January to February. Likewise, the national occupancy rate improved on a sequential basis for the first time since August 2011, increasing from 93.36% in January to 93.57% in February. This was the highest month-to-month gain since April 2011, and the third highest in the last 18 months. The combined effective rent and occupancy growth rates--0.87%--provide a potential monthly revenue growth figure, and exceed every month since May 2011.

Axiometrics also notes that Class A properties--which were the first to expand rents in the current apartment market recovery--are still increasing rents but at a slower pace, especially in some of the “early recovery” markets. In contrast, Class C properties will help increase overall rent growth numbers this year, rather than being a drag as they have been the past few years.

“With improved job growth and new deliveries at a relatively low level, the apartment market appears on track to meet our bullish rent and occupancy forecast for 2012,” said Jay Denton, vice president of research for Axiometrics. “The big question is how long will this strong apartment market performance continue. Our analysis of the pipeline, as well as how much rents have already been pushed in some markets, indicate that growth will remain strong in the next one to two years, but the double-digit increases from last summer will be unsustainable long-term.”

Effective Rents

Year-to-date (YTD) effective rent growth, 0.90%, is very similar to the strong growth exhibited over the same period of 2010 and 2011, 0.91% and 1.01% respectively. REIT apartment properties have grown at an even faster rate with rents up 1.55% YTD.

C class properties gained rent growth momentum in 2011, and Axiometrics forecasts that trend to continue in 2012. Currently, C properties are outperforming A properties in relative annual effective rent growth in 40 of the top 88 markets. They are outperforming for absolute dollar growth in 25 of the top 88 markets.

Occupancy Rate

Nationally, Class A properties had the highest occupancy rate in February at 95.0%; the rate was 94.2% for Class B and 90.9% for Class C. However, Class C properties appear to be closing the occupancy gap as the sequential change in occupancy for Class C was 36 basis points (bps) in February, compared to 12 bps for Class A properties and 21 bps for Class B.

Axiometrics’ forecast for strong rent growth in 2012 is based partly on current strong occupancy for Class A assets and the impact this occupancy will have on rents and occupancy in other classes. Specifically, out of the top 88 markets in the country, Class A properties in 78 markets are more than 94% occupied, and in 51 markets they are more than 95% occupied.

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