U.S. Apartment Market Sees Strong 2018 Prime Leasing Season

Most apartment leases in the U.S. are signed between April and September, and this year’s prime leasing was even more robust than usual.

Demand volumes for the 2nd and 3rd quarters of 2018 totaled roughly 238,000 units nationwide, according to the recent RealPage Asset Optimization webcast. That’s notably better than the average absorption of 214,000 units recorded for that six-month period each year during the current economic cycle, which started in early 2010. In the decade prior to 2010, the prime leasing season average was even more moderate at roughly 153,000 units, held down by a period of demand loss in 2001, in the middle of the dot-com crash.

Most markets across the nation benefited from strong absorption during 2018’s prime leasing season. The areas generating the most apartment demand in the past six months were generally those markets that received the largest volume of new units during that time frame. Seven of the top 10 also ranked among the nation’s leaders for job growth during the current cycle.

New York led the nation for apartment demand from April through September, with nearly 14,800 units absorbed. That’s well ahead of the 10,500 units of demand this market has averaged during prime leasing season throughout the current cycle. Additionally, the six-month demand tally in 2018 more than doubles the volume of units completed during the same time frame. New supply increases apartment availability, so new completions are a key factor for demand in the Big Apple, which saw the nation’s highest average occupancy for the current cycle.

Dallas absorbed over 14,600 apartments during 2018’s prime leasing season, topping the market’s nation-leading supply volume of over 11,000 units. This was an especially strong showing for the Texas market, which generally averages demand at about 9,100 units in the 2nd and 3rd quarters. The same story is visible in completions. The 11,091 units delivered in the past six months is hearty, even for a metro that continually ranks among national leaders for supply. Helping sustain this momentum, Dallas has been a national leader for job growth during the current cycle.

Chicago was the nation’s #3 demand performer in 2018’s 2nd and 3rd quarters, absorbing nearly 11,000 units. This was the strongest prime leasing season the market has seen since 2010. Chicago is a bifurcated market, logging high demand and development activity in the urban core in recent years. About 30% of demand in 2nd and 3rd quarters came in the two high-development downtown submarkets of The Loop and Streeterville/River North – despite those areas having just 10% of the market’s existing stock. Apartment deliveries totaled about 4,900 units in Chicago the past six months, notably ahead of the long-term norm. Also helping rouse demand, job growth in Chicago kicked into high gear recently, triggered by a surge in manufacturing employment.

Washington, DC absorbed just over 10,400 units in the past six months, well ahead of the roughly 7,000 new apartments delivered in that time frame. It’s not uncommon for demand to top the 10,000-unit mark during prime leasing season in the nation’s capital, though the 2018 tally was the strongest in three years. Washington, DC has ranked among the nation’s job growth and supply leaders during the current cycle. That activity was concentrated in the urban core and close-in suburban submarkets, but construction has touched virtually all areas. In the past six months, demand was most prominent – at about 1,000 to 1,600 units each – in the urban Central DC and North Arlington areas, but also branched out west toward Tysons Corner/Falls Church/Merrifield and Reston/Herndon.

Both Denver and Atlanta recorded demand for around 8,000 units during 2nd and 3rd quarters. In Denver, this performance was well above what this market typically sees during prime leasing season, while Atlanta’s recent absorption figures are only marginally ahead of market norms.

Posting absorption between 6,000 and 7,000 units in 2018’s prime leasing season were Los Angeles, Newark, Austin and Phoenix. All these markets are performing well ahead of regional demand averages.

Demand has remained relatively solid in Newark throughout the current economic cycle, but this latest performance is the best prime leasing season the market has seen since 2010. With few vacancies in existing product, demand has been concentrated in submarkets generating the most new supply.

Austin, like Chicago, leads a double life, with a divide between the performances seen recently in the urban core and in the outlying areas. Austin is also the only market on this list that did not rank among national top 10 leaders for supply during prime leasing season, though the Texas capital city did come in at #13 for that metric, following #11 Seattle and #12 Houston.

In the past six months, Phoenix has seen demand focused on the submarkets receiving the biggest volumes of new supply – Chandler, Deer Valley and North Central Phoenix. Generating demand for these high-end areas, Phoenix’s employment base surged by one of the best growth rates in the country during the current economic cycle.