Apartment Leasing Momentum Remained Brisk in July, But Uncertainty Looms

Apartment leasing continued at a brisk pace in July, keeping occupancy rates steady and holding rents flat. While conditions vary greatly by market, most apartments are in solid shape entering the crucial month of August, with an outlook muddied by stalled negotiations on Capitol Hill.

Guest cards – the key measure of prospects indicating interest in an apartment unit – were up 14.9% in July 2020 compared to the same time last year in a same-store set of market-rate, professionally managed properties nationally. Traffic to property websites jumped 3.7% year-over-year. Both measures came in roughly on par with June results. Total new lease signing volumes climbed 5.7% compared to the same time last year.

At the same time, retention rates remained high. As a result, occupancy rates in the stabilized same-store dataset held steady. That differs from survey-based occupancy rates, which show slight declines in part due to the impact of properties completing lease-up.

Executed rents for both new leases and renewal leases remains roughly on par with last year’s numbers. (Actual executed rents continue to trend ahead of list/effective asking rents sourced from websites and phone calls.) The data is sourced from millions of units on actual rent rolls running on the RealPage platform.

Federal unemployment benefits have no doubt buoyed apartment performance this summer. Those benefits expired at the end of July, and Congress has not yet agreed to a new package. That’s a significant question mark for nearly all sectors, multifamily included.

But the good news is that despite all the uncertainty, apartments entered August in much better shape than had been expected when COVID-19 shut down the economy in the second half of March. So far, evictions remain very low – even where legally allowed. Current rent collections data through July combined with other key indicators continue to suggest fears of an eviction tsunami in 3rd quarter are wildly overstated.

At a metro level, conditions vary significantly. Most large metros did record more new lease signings in July 2020 than in July 2019, some due to pent-up demand from the lockdowns seen earlier. Notably, hard-hit coastal markets like New York, Bay Area and Southern California started to make some gains, but still have huge holes to dig through. Sun Belt metros continued to perform well – and included some surprises. Lease signings unexpectedly climbed materially in Las Vegas, Orlando and Houston – three metros with big exposure to weak economic sectors.

Executed same-store rents were basically flat, up 0.1%, in the last week of July – continuing a pattern of flat new lease pricing seen since mid-June. Top performers remain the markets typically seen as “slow and steady,” including a number of Midwest metros plus Memphis, Tampa and Jacksonville, among others. Most of the nation’s big metros recorded rent change ranging from slight cuts to slight bumps.

Only a handful of metros are still recording large cuts in signed, executed new lease rents. Most notably, rents continued to plunge by double-digits in New York, San Francisco and San Jose. Large single-digit cuts came in other big coastal metros including Los Angeles, Miami and Seattle.

Operators continue to record slight cuts in executed renewal rents nationally. The exceptions remain the same coastal metros. New York slashed renewal pricing 11.2% in July and San Francisco cut 7.2%. San Jose, Seattle and Boston all recorded cuts around 5%.