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Small Market Leaders for Apartment Occupancy

Small Market Leaders for Apartment Occupancy

While several major apartment markets have seen occupancy reach recent highs, a big group of smaller markets are logging even tighter occupancy rates.

Among the nation’s largest 50 apartment markets, New York took the occupancy lead in 2nd quarter 2019, with a rate of 97.3%. But if the sample widens to the top 150 markets, 20 of the nation’s smaller areas logged occupancy that topped the New York rate. Among these national occupancy leaders, most are in the country’s West or Northeast regions, and most have seen minimal new supply volumes during the current economic cycle.

Some of the strongest occupancy readings in the country were seen in New Hampshire’s Manchester/Nashua/Concord area (98.3%) and in Worcester (98.1%), located less than two hours away on the Massachusetts/Connecticut border. Both markets saw their existing base expand by a modest 4% to 6% since early 2010, much slower than the 12.7% pace recorded in the U.S. overall. Rent growth has also been strong in both areas. In the year-ending 2nd quarter, prices were up by roughly 5% to 6%, well ahead of both the national norm (3.1%) and the long-term average for both areas.

Another five Northeast markets ranked among national occupancy leaders. Portland, ME was 98% occupied, while Salisbury, on the Maryland/Delaware border was 97.8% full. Springfield, MA recorded a 2nd quarter rate of 97.5%, while the nearby Lancaster and Allentown-Bethlehem-Easton areas of Pennsylvania hit 97.4%.

Among these, the same Northeast trends in supply and rent growth manifest. All but one of these markets recorded inventory expansion below the 5% mark. The only exception was Allentown-Bethlehem-Easton, where the existing base was up by a slightly more robust 8.2% – still below the national norm. Rent growth remains solid, with price increases registering between 3.7% on the low end (in Allentown-Bethlehem-Easton) and up to 4.8% (in Portland, ME).

Of the eight West region markets on the list of top national occupancy performers, five are in California. All but one of these smaller California markets is located between San Jose and Los Angeles. Salinas recorded 2nd quarter occupancy of 98.2%, while Fresno and Bakersfield were 98% full. Stockton-Lodi, the only exception, located between San Jose and Sacramento, recorded 2nd quarter occupancy of 97.7%, while the rate in Santa Maria-Santa Barbara was similar at 97.6%.

Among these California markets, Fresno saw the most new supply delivered during the economic cycle, expanding its existing base by 4.8%. Santa Maria-Santa Barbara’s inventory grew by 3.6% and Bakersfield’s stock was up by 3.2%. Salinas and Stockton-Lodi saw the mildest inventory growth, between 2.6% and 2.9%. In true California fashion, rent growth in all of these areas is still performing notably ahead of the national norm. In fact, Santa Maria-Santa Barbara recorded some of the strongest rent growth in the nation in the year-ending 2nd quarter, with a price hike of 6.6%.

Boise City, the most populous city and capital of Idaho, was the only West region market on the top 20 occupancy list with an inventory base that has expanded notably during the current cycle. The existing stock was up by 23.4% – almost twice the U.S. norm – since early 2010. Helping occupancy remain strong here, Boise City has seen a boom in population and employment growth in recent years. Rent growth has also been solid. In the past year, prices were up by 6.4%, one of the best showings in the nation.

The only two South region markets with nation-leading occupancy rates in 2nd quarter were Columbus, GA and Fayetteville, AR. Columbus was 97.6% full while Fayetteville recorded a similar rate of 97.4%. Among the nation’s largest 150 markets, Columbus logged the most progress in the past year, with occupancy climbing 350 basis points (bps). Fayetteville, on the other hand, saw occupancy fade by 50 bps in the past year, which was one of the worst performances in the country.

These two South region markets logged inventory growth well ahead of the West region markets, with the existing base in Columbus growing 12.1% and Fayetteville increasing even more at 15.3%. Similar to occupancy change, the roads between these markets diverged in rent change during the past year. While Fayetteville continued to see strong rent growth over 4% in the past year, Columbus seemed to give up some pricing in favor of occupancy, as rents were up only 2.9%.

The three Midwest markets with a top occupancy ranking were Ann Arbor, MI; Madison, WI and Springfield, MS. Among these, Madison was the only market to log cycle inventory growth ahead of the national average at 16.3%. Meanwhile, the existing base increase was milder in Ann Arbor (6.8%) and barely registered at all in Springfield (0.1%). Madison also stepped away from the other two markets for rent growth in the past year, recording an increase well below the national average (2.3%). Operators were more aggressive with annual rent growth in Springfield (3.7%) and Ann Arbor (3.3%).