Occupancy and rents both rise, yielding revenue growth of 1.1 percent quarterly, 5.8 percent annually
(April 3, 2012) — The U.S. apartment sector posted revenue growth of 1.1 percent during 2012’s first quarter, according to MPF Research, an industry-leading market intelligence division of RealPage, Inc. (NASDAQ: RP). National occupancy climbed 0.2 percentage points during the three-month period, and effective rents for new leases jumped 0.9 percent. Annual revenue growth came in at 5.8 percent, with occupancy up 1.2 percentage points since early 2011 and effective rents up 4.6 percent. A discussion of the nation’s latest apartment performance results is available at www.realpage.com/MPFQ1-2012-Report.
“An improving economy and still-limited loss of renters to home purchase are helping spur apartment demand,” said Greg Willett, MPF Research vice president. “At the same time, deliveries remain very limited by historical standards.”
Apartment demand registered at 39,900 units across the country’s 100 largest metros during the first quarter, according to the MPF Research data. That demand figure was nearly three times the apartment completion volume of 13,600 units.
Occupancy rose to 94.9 percent for the first quarter. The jump in occupancy reached just over 3 percentage points since the performance bottomed in late 2009. New-lease pricing now is up 8 percent from its late 2009 low for the last cycle.
The pace of rent growth is hitting a plateau now. “Rents have been climbing for quite a while,” Willett said. “Thus, while ongoing increases do exceed the historical norm, we’re just repeating what happened a year ago in most markets.” MPF Research’s expectation is that rent growth in calendar 2012 will register at 4.5 percent, basically in line with the 2011 result and the annual rate of change seen currently.
The San Francisco Bay Area metros and Boston remain the nation’s leaders for rent growth. Annual increases for new-lease pricing are at double-digit levels of 12.6 percent in San Jose and 11.5 percent in San Francisco. Rent growth is at 8.1 percent in Boston and 7.7 percent in Oakland.
Rents for new leases rose 6.4 to 6.5 percent during the year-ending in first quarter across Austin, Denver, Pittsburgh, Charlotte and Chicago. Nashville completes the top 10 list for the largest rent increases among the nation’s biggest metros, with prices up 5.5 percent from first quarter 2011 to first quarter 2012.
| Rent Growth Leaders in Year-Ending 1Q 2012 | ||
| Rank | Metro | Annual Rent Growth |
| 1 | San Jose | 12.6% |
| 2 | San Francisco | 11.5% |
| 3 | Boston | 8.1% |
| 4 | Oakland | 7.7% |
| 5 (tie) | Austin | 6.5% |
| 5 (tie) | Denver | 6.5% |
| 5 (tie) | Pittsburgh | 6.5% |
| 8 (tie) | Charlotte | 6.4% |
| 8 (tie) | Chicago | 6.4% |
| 10 | Nashville | 5.5% |
With apartment demand running so far ahead of new supply, developers are scrambling to get more product coming out of the ground. The number of apartments physically under construction at the end of the first quarter climbed to roughly 130,000 units across the nation’s 100 largest metros.
“Development activity is accelerating and will climb quite a bit further,” Willett said. “Still, it’s important to realize that we don’t seem to be in any real danger of overbuilding in the short term. The key comparison point to keep in mind is about 300,000 units. That was the annual starts volume for more than a decade prior to the recession seen in 2008-2009, and we thought of that as a fairly restrained pace at the time. We’re only now approaching the halfway point for normal building levels, and even at the end of the year we should just be two-thirds to three-fourths of the way there.”
If there is any overbuilding just ahead, it’s likely to be on a spot basis, according to the MPF Research analysis. “While the biggest increases in construction are seen in the Texas markets, those areas also are the country’s job growth leaders. Thus, the stocks on the way in the Lone Star State do look absorbable fairly easily. The places to watch are locales where construction is approaching its long-term norm at the same time that job growth is somewhat sluggish. Examples are seen in some neighborhoods in the Washington, DC area as well as Orange County and Seattle.”
About RealPage
Located in Carrollton, Texas, a suburb of Dallas, RealPage provides on demand (also referred to as “Software-as-a-Service” or “SaaS”) products and services to apartment communities and single family rentals across the United States. Its on demand product lines include OneSite® property management systems that automate the leasing, renting, management, and accounting of conventional, affordable, tax credit, student living, senior living and military housing properties; LeaseStar™ multichannel managed marketing that enables owners to originate, syndicate, manage and capture leads more effectively and at less overall cost; YieldStar® asset optimization systems that enable owners and managers to optimize rents to achieve the overall highest yield, or combination of rent and occupancy, at each property; Velocity™ billing and utility management services that increase collections and reduce delinquencies; LeasingDesk® risk mitigation systems that are designed to reduce a community’s exposure to risk and liability; OpsTechnology® spend management systems that help owners manage and control operating expenses; and Compliance Depot™ vendor management and qualification services to assist a community in managing its compliance vendor program. Supporting this family of SaaS products is a suite of shared cloud services including electronic payments, document management, decision support and learning. RealPage’s MyNewPlace® subsidiary is one of the largest lead generation apartment and home rental websites, offering apartment owners and managers qualified, prospective residents through subscription, pay-per-lead and LeaseMatch pay-per-lease programs. Through its Propertyware subsidiary, RealPage also provides software and services to single-family rentals and low density, centrally-managed multifamily housing. For more information, call 1-87-REALPAGE or visit www.realpage.com.
About MPF Research
MPF Research has been providing market intelligence and objective insights exclusively to the multifamily industry since 1961. Our database of individual property occupancy and rental rates is second to none. MPF is relied upon to formulate and fine tune business strategies in a variety of multifamily industry specialties, including investment, operations and development. Visit www.mpfresearch.com for more information.