Strong leasing activity in this young summer season has pushed occupancy to a level the nation’s apartment market hasn’t seen since the tail end of the tech boom in the early 2000s.
After surging 60 basis points (bps) since April, U.S. apartment occupancy hit 96.0% in May, the highest rate since 2001. Among the nation’s 50 largest local apartment markets, only one – Milwaukee – lost ground in occupancy month-over-month. The other 49 large markets gained at least 10 bps of occupancy from April to May 2019.
Meanwhile, average annual rent growth among the nation’s apartments held solid at 3.1% in May, landing well above May 2018’s level of 2.6%. May marks the 10th consecutive month of annual rent growth at 3% or higher.
Rents averaged $1,394 across the 150 largest local apartment markets in May.
The primary driver in strengthening occupancy – demand – was particularly healthy in May. Monthly absorption of 119,605 units is the highest single month total throughout this economic cycle, which began in 2010, by a large margin. April and May 2019’s combined absorption of 162,450 indicates the strongest beginning to any prime leasing season so far in this cycle. Prime leasing season is considered to run from April through September, when the majority of apartment leases are signed for the year.
May’s annual absorption of 336,467 units is the highest the nation has seen since late 2010 and early 2011, when the economy was first regaining its footing after the recession. Annual absorption also far outpaced concurrent deliveries of 254,027 units.
Healthy demand should be reassuring to developers as the number of units under construction nationwide keeps climbing. More than 426,000 units are under construction in the U.S. as of May, which represents 2.4% of the nation’s existing apartment stock. About 363,192 of those units are expected to complete in the next 12 months.
The leaderboard of markets with the highest annual rent growth has mostly familiar names. Las Vegas has reached an astounding 9.0% annual rent growth, up 320 bps year-over-year. Charlotte is back in the top 10 after falling out in April. Tampa fell out of the top 10, after rent growth softened to 3.5% annually.
Boston saw the single largest rent growth gain of 60 bps from April to May, with May’s annual increase standing at 3.5%. At 96.8%, Boston also has one of the highest occupancy rates among the largest markets.
Bucking a recent downward trend, Anaheim’s rent growth moved upward, gaining 40 bps month-over-month to stand at 2.5% in May.
After nearly two years of trailing the U.S. average, Portland’s rent growth gained 50 bps worth of momentum to stand at 3.4%, outpacing the national norm. Portland’s occupancy also picked up meaningfully to stand at 96.2%.
In South Florida, West Palm Beach continues to see the highest rent growth of 3.3%, despite Fort Lauderdale 50 bps gain that brought rent growth to 2.5%. Miami still lags at 1.8% – the lowest rent growth among the nation’s largest markets except Houston, which still stands at 0.1%.