Occupancy Reaches 95%; Rent Growth Steady
Axiometrics - Dave Sorter - 12 June 2017
Ninety-five percent is a benchmark for apartment occupancy. It is the level at which Axiometrics considers a property or market “full.” And May 2017 apartment market research shows that that the sector once again has a full house.
May occupancy was right at 95.0%, an 11-basis-point (bps) increase from April’s 94.8%, but 29 bps below the 95.2% of May 2016. The latest figures mark the first time that occupancy was 95.0% or higher since September 2016, the last month of a seven-month streak at those levels.
In addition to the overall national market, 30 metros among the Axiometrics top 50, based on number of units, recorded occupancy rates of 95.0% or higher in May, with 14 of those at 96.0% or more. Occupancy has increased year-to-date in all except five of the top 50 markets.
Most of the metros topping the occupancy charts also have some of the highest annual effective rent-growth numbers relative to the nation. The top 10 occupancy metros in May were:
Two of the five metros in which occupancy has declined are in South Florida – Miami and Fort Lauderdale (West Palm Beach recorded just a 2-bps gain). The other falling markets were Austin, Raleigh and Charleston.
Still, eight of the 10 markets with the lowest occupancy have a higher percentage of occupied units than they did at the beginning of the year.
Rent Growth Still the Same
Meanwhile, annual effective rent growth in May stayed almost exactly where it stood in April and in the same general range as it has since December. May’s 2.2% was just 1 bps off from April’s rate. Rent growth has remained in a 19-bps range for the past six months, and in five of those months was in a 6-bps range from 2.12%-2.18%.
This type of steadiness was last seen two years ago, when effective rent growth remained within an 18-bps range, 5.00%-5.18%, from February-September 2015.
General stability was characteristic of the Axiometrics Top 50 markets. Rent growth increased by more than 100 bps only in Warren, MI (+122 bps), while it decreased by more than 100 bps only in Anaheim (-114 bps). Some 31 metros recorded rent-growth changes in the +25 bps to -25 bps range.
In other words, steady.
Odessa Hits a Gusher Again
The Odessa, TX apartment market was among the top rent-growth metros in the country four years ago. Its annual effective rent growth was 19.0% in June 2013 as the energy industry on which the market is dependent thrived.
Then, oil prices started their free-fall in June 2014, not bottoming out until January 2016. Rig counts, and therefore jobs in the oilfields, dropped precipitously. The apartment market in Odessa – as well as other oilfield markets such as Midland, TX and Williston, ND – more than felt the effects, with Odessa rent growth reaching a low point of -29.8% in February 2016.
In the five quarters since, oil prices have stabilized at about $50 per barrel, rig count has more than doubled and the jobs are returning. So has Odessa’s apartment market. The West Texas metro recorded 10.9% rent growth in May, the second-highest among metros not in the Axio Top 50. That’s a 4,069-basis-point increase in 16 months.
The major-metro rankings were…well…steady, like the national market. The top four – Sacramento, Riverside, Seattle and Salt Lake City – remained the same, while Orlando, San Diego, Fort Worth, Phoenix and Nassau-Suffolk (Long Island) stayed in the top 10, though some were in different positions.
The biggest movements featured the two markets referenced in the aforementioned rent growth section that had the largest increase and decrease. Warren’s 122-bps rise moved it from No. 16 to No. 7, while Anaheim’s 114-bps change dropped it from No. 6 to No. 16.