Annual rent growth of 3.2% sustains the upturn in price increases that emerged in late 2018
RICHARDSON, Texas (March 28, 2019) – U.S. apartment rents climbed 3.2 percent on an annual basis as of the first quarter of 2019, according to real estate technology and analytics firm RealPage, Inc. (NASDAQ: RP). Annual rent growth has topped the 3 percent mark for six consecutive months, accelerating from a pace that had hovered around 2.7 percent in all of 2017 and in the initial nine months of 2018.
Occupancy stood at 95.2 percent for the first quarter, edging up from 95.1 percent a year ago. However, since the cold weather months are a period of limited leasing activity, occupancy has slipped from its third quarter 2018 seasonal peak of 95.8 percent. Demand in the past six months could not keep up with new product deliveries that totaled 127,121 market-rate units in fourth quarter 2018 and first quarter 2019.
“It’s encouraging for apartment investors to see rent growth holding up so well when the new supply volumes are aggressive,” according to RealPage chief economist Greg Willett. “While brand new properties still moving through the lease-up process tend to be offering discounts, pricing power actually has improved a bit for luxury developments where the initial resident base is now in place. Properties at middle-tier to lower-end price points are maintaining their already-strong rent growth momentum.”
Among the country’s large metros, local rent growth leaders are Phoenix and Las Vegas, each area posting annual price jumps around 8 percent. At the next tier of performance, rent growth reaches 5 percent or a little better in Atlanta, Greensboro/Winston-Salem, Memphis and Sacramento.
Some small metros are experiencing even stronger rent boosts. Rents are up 15.2 percent in the West Texas Oil Patch markets of Midland and Odessa, while price increases of roughly 7 to 8 percent are occurring in Wilmington, N.C.; Tucson, Ariz.; and Gainesville, Fla.
Houston’s performance is the weakest among big metros, with rents in the first quarter matching prices from a year ago. Slight rent cuts are occurring in three small markets: College Station, Texas; Fargo, N.D.; and Santa Rosa, Calif.
|Annual Rent Growth Leaders as of 1Q 2019|
|Big Metros||Growth||Small Metros||Growth|
|Phoenix, AZ||8.0%||Midland-Odessa, TX||15.2%|
|Las Vegas, NV||7.9%||Wilmington, NC||8.4%|
|Atlanta, GA||5.3%||Tucson, AZ||7.8%|
|Greensboro/Winston-Salem, NC||5.2%||Gainesville, FL||7.2%|
|Memphis, TN||5.1%||Boise, ID||6.8%|
|Sacramento, CA||5.0%||Pensacola, FL||6.6%|
|Riverside-San Bernardino, CA||4.8%||Manchester-Nashua, NH||6.5%|
|Austin, TX||4.7%||Reno, NV||6.4%|
|Jacksonville, FL||4.2%||Santa Maria, CA||6.3%|
|Tampa-St. Petersburg, FL||4.2%||Deltona-Daytona Beach, FL||6.1%|
|Charlotte, NC||4.0%||Huntsville, AL||6.0%|
|Source: RealPage, Inc.|
Building in the U.S. apartment sector remains at three-decade highs. Market-rate apartment properties under construction contain more than 403,000 units that will be finished during roughly the next 18 months.
Near-term new supply leaders include Dallas, Washington, D.C., Los Angeles, Seattle and Houston. Dallas has the most product on the way, just over 29,000 units. Adding in the 7,000 or so apartments under construction in adjacent metro Fort Worth pushes ongoing building to nearly 36,000 units across North Texas.
“As we move into prime leasing season for 2019, there will be lots of high-end new product available in some spots,” according to Willett. “New luxury properties are going to be scrambling to attract affluent renters.”
“At the same time, vacant units available to lease can be very difficult to find in properties in the middle to lower end of the pricing spectrum.”
RealPage is a leading global provider of software and data analytics to the real estate industry. Clients use its platform to improve operating performance and increase capital returns. Founded in 1998 and headquartered in Richardson, Texas, RealPage serves more than 12,200 clients worldwide from offices in North America, Europe and Asia. For more information about the company, visit https://www.realpage.com.