Occupancy climbs to 96.3 percent; new-lease rents are up 3 percent annually
RICHARDSON, Texas (October 1, 2019) – U.S. apartment occupancy is at a near-record level, according to real estate technology and analytics firm RealPage, Inc. (NASDAQ: RP). Occupancy as of 2019’s third quarter climbed to 96.3 percent, up from 95.9 percent a year earlier. Today’s occupancy is roughly in line with the all-time high of 96.4 percent achieved nearly two decades ago in late 2000.
“Tight occupancy results from unusually strong apartment demand in recent months,” according to RealPage chief economist Greg Willett. “Apartment leasing activity accelerates during the warmer weather months, and demand was especially strong in this year’s core period of product demand. New household formation continues, and rentals are capturing a sizable share of the resulting housing demand. At the same time, loss of existing renters to home purchase remains limited relative to historical levels.”
Renter demand boosted the number of occupied apartments by 118,000 units in the third quarter. That product absorption pace is 24 percent above average demand posted in the third quarter of the previous five years.
Rents Rise
Rents for new leases increased 1.2 percent during the third quarter, pushing the annual rent growth pace to 3 percent. Average monthly rent has reached $1,416.
“While a 3 percent bump in rents is significant for individual renter households, it’s perhaps surprising that tightened occupancy hasn’t led to even bigger price growth,” Willett said. “As we talk with apartment owners and operators, they are expressing concerns about the possibility of slowdowns in economic growth and apartment demand during the near term. If demand cools, it can be better to sacrifice a little on rent achievement in order to go into that more competitive leasing environment with maximum occupancy.”
Among the country’s large metros, local rent growth leaders are Phoenix and Las Vegas, with each area posting annual price jumps of roughly 7 to 8 percent. Those two areas have been the country’s rent growth leaders for a couple of years.
Rent growth momentum is shifting in quite a few other locations. The rent growth pace is accelerating across some markets in the Southeast, especially in the Carolinas and Tennessee. In contrast, rent growth is cooling in most of California’s biggest metros. There’s also some slowing of rent growth in parts of Florida, where year-ago apartment pricing was pushed when hurricanes displaced households from their previous residences.
| Annual Rent Growth Leaders as of 3Q 2019 | ||||
| Big Metros | Growth | Small Metros | Growth | |
| Phoenix, AZ | 8.2% | Wilmington, NC | 8.2% | |
| Las Vegas, NV | 7.5% | Boise, ID | 6.9% | |
| Greensboro/Winston-Salem, NC | 5.3% | Tucson, AZ | 6.9% | |
| Raleigh/Durham, NC | 5.3% | Santa Maria/Santa Barbara, CA | 6.8% | |
| Nashville, TN | 4.8% | Bakersfield, CA | 6.6% | |
| Austin, TX | 4.7% | Worcester, MA | 6.1% | |
| Charlotte, NC | 4.7% | Huntsville, AL | 5.9% | |
| Sacramento, CA | 4.7% | Colorado Springs, CA | 5.7% | |
| Riverside/San Bernardino, CA | 4.5% | Fresno, CA | 5.4% | |
| Atlanta, GA | 4.1% | Portland, ME | 5.4% | |
| Milwaukee, WI | 4.0% | Spokane, WA | 5.1% | |
| Cincinnati, OH | 3.9% | Albuquerque, NM | 5.0% | |
| Memphis, TN | 3.9% | Johnson City, TN | 5.0% | |
| Source: RealPage, Inc. | ||||
Construction Continues
Building in the U.S. apartment sector remains at three-decade highs. Market-rate apartment properties under construction contain about 538,000 units that will be finished during roughly the next 18 months.
“While the apartment sector’s performance has been terrific of late, the amount of product under construction does point to some near-term risk,” according to Willett. “If economic growth slows, it will be tough to sustain rent growth for luxury units at today’s level, when so much top-tier product is conducting initial leasing.”
About RealPage
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 12,000 clients worldwide from offices in North America, Europe and Asia. For more information about the company, visit https://www.realpage.com.