DALLAS, TX - Rent growth in the national apartment market is on a streak not seen for almost four years, according to Axiometrics, the leader in apartment and student housing research and analysis.
Annual effective rent growth for the U.S. apartment market in April 2015 remained steady at 5.0%, the third straight month it has been at or above 5% and the highest April rate since at least 2009, when Axiometrics began reporting the metric monthly.
The February-April 2015 period is the first three-month stretch of 5.0% or higher rent growth since June-August 2011. The annual rate hasn't varied more than 11 basis points (bps) from 5.0%, up or down, since December 2014.
"Though the rate of rent growth has been steady the past several months, the fact that rents are rising at a 5% annual clip points to an extremely robust apartment market," said Stephanie McCleskey, Axiometrics Vice President of Research. "The absorption of the large amount of new supply, fueled by increasing job gains, has been a boon for landlords and property owners -- not to mention apartment investors."
Taken to two decimal places, the March 2015 figure of 5.04% was 1 basis point higher than the February 2015 rate of 5.03% and 159 bps above the 3.45% of April 2014. Annual effective rent growth in this latest hot streak did not reach 3% until March 2014, 4% until August 2014, and 5% until December 2014.
National year-to-date (YTD) effective rent growth was 2.7% in April 2015, 6 bps higher than April 2014 -- a year that ended as the strongest of the recovery for this metric. It is the highest April YTD effective rent growth rate since the end of the recession.
"If the market sustains this trend of 5% rent growth, 2015 would exceed the surprisingly strong year of 2014 as the highest-performing year of the recovery," McCleskey said. "However, we still believe that rent growth rates will moderate as the year progresses."
Occupancy Regains 95% Milestone
The national occupancy rate was 95.2% in April, up 22 bps from March's 94.9%. Occupancy last reached 95.2% in August 2014, the first time it had attained this level since Axiometrics began reporting occupancy rates monthly in April 2008.
"Axiometrics considers properties and markets full at 95% occupancy," McCleskey said. "So, in essence, the national apartment market is full and in need of even more new supply, even though a record number of new units have been identified for delivery this year. Of course, individual markets differ, and there are some metro areas in which new supply is exceeding demand, but overall, the outlook is strong for the apartment industry."
California Dominates Top of Chart
Eight California markets were among the top 17 markets with the highest annual effective rent growth in April within Axiometrics' top 50 markets, based on total units. Oakland again topped the chart with annual effective rent growth of 14.8%. The East Bay market also had the highest occupancy, 96.7%.
Denver regained second place, with 11.5% annual effective rent growth, as San Jose dropped to third. Portland, OR broke the Bay Area's long-lasting streak of holding three of the top four places by reaching No. 4 in April. San Francisco dropped to No. 5.
"Rent growth in the Bay Area is starting to moderate, but landlords probably don't mind too much since they're still able to raise rents at a rate of 9%-15% per year, depending on the market," McCleskey said. "However, it may portend a long-term trend toward moderation. We'll know more in the next month or two."
Orlando achieved the biggest rise among the top 17 in April, moving from 15th place to 10th, with effective rent growth of 6.7%. Across Florida, West Palm Beach (6.4% annual effective rent growth) sustained the steepest decline, dropping from eighth place in March to 14th.
Meanwhile, the Riverside, CA market entered the chart at No. 11 in April, as Fort Worth dropped off the list from its No. 10 perch in March.
Among the "Selected Other Markets" in Axiometrics' top 120 markets based on units, the drop in oil prices over the past year affected the Odessa, TX apartment market. The West Texas area ranked No. 2 among the top 120 in March, but was No. 21 in April, as annual effective rent growth plummeted 684 bps from 13.4% in March to 6.6% in April.