DALLAS, TX - The national apartment market continued its unprecedented strength in September 2015. The 5.2% annual effective rent growth was the highest since July 2011 (5.3%) and was the eighth straight month the rate has been 5.0% or higher, according to Axiometrics, the leader in apartment and student housing market research.
"This is the 'Year of the Apartment Market, Part 2,'" said Stephanie McCleskey, Axiometrics Vice President of Research.
September's rate was a 6-basis-point (bps) increase from August's 5.1% and exactly 100 bps higher than the 4.1% of September 2014.
The portfolios of publicly traded apartment REITs have been one of the biggest success stories in the market. Nationally, REITs reported 7.0% annual effective rent growth in September, the highest level recorded since Axiometrics began reporting the metric.
"Whereas 2014, what we called 'The Year of the Apartment Market,' featured rapidly rising rent-growth rates, increasing from 2.8% to 5.0%, the metric has remained extraordinarily steady so far in 2015," McCleskey said. "The eight months the rate has been above 5% is the longest sustained period of strength we have seen. The last growth cycle was only four years, and this cycle is already five years long -- with no sign of stopping."
Strong demand for apartments is also driving heightened occupancy levels.
The nation's apartments were 95.3% occupied in September, a 10-bps decrease from August's 95.4%, but the third strongest month this year. The September rate was an 18-bps increase from the 95.1% of one year earlier.
Occupancy has been 95.0% or higher -- the point at which Axiometrics considers a market full -- for six straight months and 10 of the past 16 months.
Last month's occupancy was the highest of any post-recession September.
YTD Rent Growth: 2015 Strongest So Far
A measure of the national apartment market's Herculean strength in 2015 is the national year-to-date (YTD) effective rent growth rate of 5.8% in September. That rate is the highest of not only this year, but also of the entire post-recession period.
"If this year follows the trends of previous post-recession years, growth rates should start to decrease next month," McCleskey said. "However, 2015 has outperformed every post-recession year for the past six months, and occupancy rates remain so high that there might not be much of a slowdown."
Portland Still No. 1, but California Dominates Top 10
Portland, for the second month in a row, has the highest annual effective-rent-growth rate (14.3%) among Axiometrics' top 50 metros, based on number of units.
Oakland, which led the list for more than a year before last month, ranked second at 13.0%.
Six California markets were represented among the top 10 markets: No. 3 San Francisco (11.3%), No. 4 Sacramento (10.0%), No. 5 San Jose (9.3%), No. 8 San Diego (8.4%) and No. 10 Riverside (7.7%). Los Angeles (7.1%) placed 13th.