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Early 2015’s Apartment Demand Leaders

Early 2015’s Apartment Demand Leaders

The nation’s apartment demand volume in Q1 2015 proved very impressive. Preliminary figures show that absorption across the country’s 100 largest metros came in at roughly 64,300 units, a jump of 55% from the demand tally seen during the initial three months of 2014.

Helping push up those apartment absorption stats, job creation in early 2015 well exceeds the volume recorded in early 2014. Furthermore, because apartment deliveries have climbed, more product availability is helping grow demand capacity. While almost all of the country’s largest local apartment markets are registering encouraging demand volumes, the figures are especially impressive in a few spots – some of them perhaps a little surprising.

Let’s look at the apartment demand leaderboard specifically for the January to March 2015 time frame:

Houston

Given concerns about what a chaotic energy sector will do to Houston’s economy, did you have this one pegged as the #1 apartment demand center during early 2015? The metro absorbed 5,465 units in Q1 to take that first-place spot. Shaping the apartment demand performance, net job growth in Houston remains strong (at least for the moment), despite layoffs that are in process among some energy industry employers. Also, general economic uncertainty appears to be working to the apartment market’s benefit so far in that loss of renters to home purchase looks a bit more limited than it was previously. Finally, with 2015’s apartment completions set to nearly double 2014’s total, product availability is trending up in a big way.

Miami

It’s not unusual for Q1 to prove to be Miami’s strongest quarter for apartment demand throughout any given calendar year. Residents don’t have to deal with the bad weather seen in so many other places, and there tends to be a mild snowbird bump from households who spend the winter months enjoying the sunshine. Still, Miami’s Q1 2015 demand for 4,890 units is a stunningly big figure, the strongest absorption seen in any quarterly period over the past decade. Helping spur demand in Miami, the metro’s annual employment growth pace (3.4% as of February, according to the Bureau of Labor Statistics) has climbed about 100 bps during the past few months. And, completions totaling some 2,200 units in late 2014 and early 2015 were the metro’s biggest block of new supply seen in several years, so more units have been available to lease.

boston-apartments-q4-2013

Boston

Very healthy employment growth and a significant increase in deliveries that has made more units available to lease are factors that point to the potential for strong apartment demand in Boston. However, the metro tends to exhibit a very pronounced seasonal pattern in its leasing activity, with very few apartments absorbed during the winter months of Q1. You might think that would be especially true this year, since Q1 2015 brought record snowfall when the metro was hit with storm after storm after storm. Thus, Boston is the real shocker on the demand leaders list, holding the #3 position with 4,645 units absorbed in the January to March period.

Austin

Like other metros on this list, Austin is a place where job generation is impressive and where increased apartment deliveries have pushed up the volume of product available to lease. Still, it’s very unusual to see much of anything happen in the Texas capital specifically during Q1. In 2011-2014, for example, Q1 demand came in between net move-outs of 400 units and net move-ins of 400 units. Looking at that comparison point, Q1 2015 demand for 4,402 units – the fourth-highest tally nationally – is huge. You have to go all the way back to the late 1990s to see a three-month period of meaningfully stronger absorption.

ATX

Dallas/Fort Worth

Consistently the country’s top apartment demand market in recent years, North Texas is also adding more jobs than any other locale and is an active construction center. Viewed from that perspective, the question might be why the area’s Q1 2015 apartment demand total of 3,537 units, while fifth-best nationally, isn’t bigger. The answer is that demand for about 3,500 units is all the market could do given product availability. Absorption came in a hair above the quarterly completion count, and occupancy in the existing product base is already at a 14-year high at the same time that annual rent growth is hitting an all-time record.

Looking to the remainder of 2015, the pace of apartment completions will accelerate in Dallas/Fort Worth, likely enabling North Texas to again take the top position for demand over the course of this year. Denver, too, will see product availability grow quite a bit due to more completions, so look for that metro to make an appearance on the demand leaders list. Los Angeles and Washington, DC, are additional good candidates to move up the absorption rankings relative to their rates posted in Q1, specifically.

In contrast, Miami and Boston surely will move down the list a little, as they just won’t have the available stock to post the absorption that will be seen in some other metros. And, Houston is a wild card: Big scheduled completions point to enough available units for the metro to remain toward the top of the absorption leaderboard, but it’s not clear whether the economy will grow at a pace strong enough to provide the underlying support for huge demand.


(Image Source: Shutterstock)

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