Operators Defaulting to Longer Lease Terms Amid Record Supply Levels

As the apartment industry continues to labor under a wave of new supply, operators have had to find ways to navigate the largest volume of completions in more than 50 years. One of those ways has been to offer longer term lengths for both new and renewal leases.  Longer term leases help reduce the number of simultaneously vacant units during a period when renters now have more options than ever to choose from, while also potentially timing future unit availability with lower supply volumes. In the five years prior to 2020, the average term length for a signed new lease was roughly 12 months while renewals averaged 11.5 months, according to data from RealPage Market Analytics. But as new unit deliveries began to increase sharply in 2023, operators pivoted to offering longer lease terms. In turn, average lease term lengths now sit at their highest levels in the past decade. New lease terms have seen the largest change from their pre-COVID norm, increasing 7% to an average length of nearly 13 months as of January. Renewals have seen a slightly smaller increase from historic levels of 5%, with an average term length of 12 months.