U.S. Apartment Market Performance Remains Solid
U.S. apartment occupancy averaged 95.1% in 4th quarter 1999, according to the latest issue of M/PF Research, Inc.’s U.S. Apartment Market Report. Demand kept in pace with new supply in most markets during 1999, as today’s occupancy figure inched up 0.2 points from the performance seen a year ago. However, current occupancy was down from fall 1999’s peak of 96.1%, reflecting that the 4th quarter routinely is a slow leasing period for all but a few "snowbird" destinations.
Providing further evidence of a healthy marketplace, rents continued to grow at a level well in excess of general price inflation. Measured on a same-store basis, average rents climbed 4.7% during calendar 1999. Annual rent growth has topped the 4% mark for six of the past seven quarters.
"What makes the story of today’s apartment market performance so compelling is that we’ve experienced six consecutive years of significant new construction, but so far have managed to avoid overbuilding in all but a handful of areas," said M/PF Research president Ron Witten.
Apartment conditions were particularly tight in much of the West. As a whole, this region registered 95.6% occupancy as of year-end 1999 and posted same-store monthly rent growth averaging 5.8% during the past year. Occupancy topped 95% and yearly rent increases reached 5% to 8% in several West region cities, including the Bay Area trio of San Jose, San Francisco and Oakland, plus Denver and parts of Southern California.
Strong performances also were seen in much of the Northeast. Occupancy for the region climbed to 95.3% as of 4th quarter 1999, and same-store rent growth accelerated to 5.3%. The northern New Jersey metros and Boston registered the tightest occupancy rates in the region, and all of the Northeast’s metros surveyed recorded same-store rent growth from 4% to 6% since year-end 1998.
Year-end occupancy registered at 94.9% in the South Region and 94.6% in the Midwest. Healthy annual rent growth of 4.3% was reported in the Midwest, while rent growth of 3.8% was recorded in the South. Tight markets include Minneapolis, Cleveland and Cincinnati in the Midwest. In the South, Washington DC was the star performer with 97.2% occupancy and same-store rent growth of 6.5%. Also strong were Norfolk, Austin, Miami and Atlanta.
A few cities report comparatively competitive leasing environments. Among the nation’s major cities, Houston appears to the be the weakest market right now. Occupancy in the Bayou City’s top-tier product dropped about 3 points during the past year to 91.4%, and annual common sample rent growth was sluggish at 2.3%. Completions were also running slightly ahead of demand in Phoenix, Indianapolis and Kansas City.
The information above presents data from M/PF Research’s 4th quarter survey of better-quality apartment communities across the nation. These preliminary findings are based on a sample of roughly 1.1 million units in some 4,200 properties.