Effective rents for new leases in the 100 largest U.S. apartment markets
grew 3.3 percent during the year ending in first quarter of 2014,
according to MPF
Research, an industry-leading, marketing intelligence division of RealPage,
Inc. (NASDAQ: RP).
The annual rent growth pace accelerated from levels of 2.9 percent as of
fourth quarter 2013 and 2.6 percent as of first quarter 2013. Typical
pricing for new leases jumped 0.9 percent during the first quarter
MPF Research analysts highlight the nation's latest apartment rent
growth statistics, as well as other key performance indicators for
rental housing in a discussion found at http://www.realpage.com/MPFQ1-2014-Report.
"The momentum seen in apartment rents during early 2014 was a bit
surprising," said Greg Willett, vice president of MPF Research. "Pricing
power normally cools during periods of significant building activity,
and there's quite a bit of construction occurring in most areas right
now. Instead of a slowdown in rent growth, we saw that pricing upturns
in the existing stock across many local markets strengthened even as
construction volumes ramped up. That pattern holds especially true in
areas that already rank at the top of the charts for overall
Metros in the West are the nation's apartment rent growth hot spots
right now, while select markets in the Southwest and the Southeast are
also experiencing significant price increases.
Apartment Rent Growth Leaders: Oakland Leads Bay-Area Trio at the Top
Oakland takes the top position for pricing power among the country's
large metros as of first quarter 2014, with rents up 9.1 percent on an
annual basis. This growth slightly exceeds the 8.7 percent upturn in San
Jose and the 8.1 percent increase in San Francisco. The three Bay Area
metros traded off the nation's No. 1 position during the past year or
so. All three illustrate the general pattern of the strongest performers
gaining even more momentum, since the annual rent growth pace within the
trio registered between 6 and 7 percent as of late 2013.
Metros in the West also take the next three spots on the national rent
growth leaderboard, with pricing up 7.9 percent in Portland, 7.6 percent
in Denver-Boulder and 6.2 percent in Seattle-Tacoma.
Miami's 5.7 percent rent growth is the best performance seen among big
markets elsewhere across the country.
Areas posting rent growth between 4 percent and 5 percent include San
Diego and Houston (each at 4.7 percent), Austin (4.3 percent), as well
as Atlanta and Nashville (each at 4.3 percent).
Several metros are recording annual rent growth just shy of the
4-percent mark, with the numbers coming in at 3.6 to 3.9 percent in
Dallas, Orange County, Fort Lauderdale, Detroit and Minneapolis-St. Paul.
Annual Rent Growth Leaders for Year-Ending 1Q 2014
Markets with Lagging Performances
Metros in the Northeast and Mid-Atlantic regions are notably missing
from the list of top rent growth performers, and some key locales in the
Midwest also register lagging performances. To some degree, there
appears to be a weather-related influence on those results. "Apartment
owners and operators in areas that experienced the roughest winter
weather are telling us they've been conservative in positioning rents
for new leases, since so few prospects have come through the front door
of late," Willett said. "That could suggest some upside in the rent
growth performance as we move into the warmer months, since the
comparatively sluggish pricing increases in some areas don't appear to
be tied directly to general economic growth or construction volumes."
Middle-market Communities Experience Strongest Rent Growth
Product niche results show the nation's strongest rent growth in
middle-market communities built in the 1990s, 1980s and 1970s. Those
properties register annual rent increases of 3.6 to 4.2 percent. Rent
growth is more moderate at 2.8 percent at the bottom end of the
product-quality spectrum. The slowest rent growth continues to register
in the top segment of the market, with rates up 2.2 percent in
properties built since 2000. However, rent growth momentum in the most
expensive properties does appear to be picking up once again, reversing
the considerable slowdown that was experienced when the first
developments in a wave of new deliveries moved into initial lease-up.
Continued tight apartment occupancy is helping stimulate the country's
significant rent growth. The first quarter 2014 occupancy figure across
the 100 largest markets registered at 95.0 percent, unchanged on a
quarterly basis and up a tiny bit from the rate of 94.9 percent seen a
12-Month Apartment Supply and Demand Identical
The first quarter apartment demand volume in the country's 100 largest
markets was 35,723 units, just under the completion figure that totaled
45,806 units. The trailing 12-month totals for demand and supply are
virtually identical: 182,321 units absorbed and 183,127 units completed.
Ongoing apartment construction in the nation's 100 largest metros
tallied at 366,342 units at the end of the first quarter. The ongoing
building volume remains fairly steady between 350,000 and 400,000 units
for a period that has now reached five consecutive quarters. "While
development activity didn't move meaningfully during early 2014, as of
late 2013 there were signs that construction starts would slow," Willett
said. "Right now, it's looking like construction starts in 2014 will
come in at levels roughly in line with the 2013 volume, with
expectations shifting mildly from a decline of about 10 percent as
"Look for continuing solid performances in the apartment sector during
the near term," according to Willett. "Once anticipated to be the most
challenging year for owners and operators in the current cycle, 2014 is
off to an impressive start. However, it's important to realize that what
happens in the first quarter really doesn't move the dial much in terms
of overall revenues because normal seasonality yields relatively limited
leasing activity. The second and third quarters are the make-or-break
periods in the apartment industry. It all comes down to leasing activity
and pricing power during the time frame when demand reaches its seasonal
About RealPage, Inc.
RealPage, Inc. is a leading provider of comprehensive property
management software solutions for the multifamily, commercial,
single-family and vacation rental housing industries. These solutions
help property owners increase efficiency, decrease expenses, enhance the
resident experience and generate more revenue. Using its innovative SaaS
platform, RealPage's on-demand software enables easy system integration
and streamlines online property management. Its product line covers the
full spectrum of property management solutions, including leasing,
accounting, revenue management, marketing solutions, resident services,
renter insurance, utility management, spend management and apartment
market research. Founded in 1998 and headquartered in Carrollton, Texas,
RealPage currently serves over 8,700 clients worldwide from offices in
North America and Asia. For more information about the company, visit www.realpage.com.
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