Occupancy increased to 95.1%, breaking the record of 95.0% set last quarter, which had been the highest since the first quarter of 2001, according to early release figures from Axiometrics, the leading apartment market research company.
Annualized rent growth reached 4.0% for the first time in almost two years, while quarterly effective rent growth increased significantly over the third quarter of 2013.
Apartments Are Full
Rent is still increasing because the market is basically filled to capacity — Axiometrics considers a property or market to be full at 95% occupancy, and national occupancy has been at or above that point for the past two quarters. So, new supply is needed to meet the demand. Currently, demand exceeds supply, according to Axiometrics Senior Vice President Jay Denton.
“New supply is hitting when the apartment market is already full,” Denton said. “We need units for people to simply have a place to live. Because of that, landlords are not under a lot of pressure to lower rents.”
Demand is strong because more people want to rent. Job growth has been high for most of 2014, millennials are delaying marriage and children, and a lot of people just don’t want to move out of apartments to purchase homes for reasons including mobility, proximity to work and play, and more restrictive mortgage requirements.
Landlords Continue Pushing Rents
Effective rent growth increased by 1.6% over the second quarter of 2014 on a quarter-by-quarter basis (reflecting the growth from July 1 to now), an improvement on the 1.2% quarterly growth of the July-September period last year. Each quarter this year has seen improved rent growth from the same quarter last year.
“Axiometrics has been calling this the year of the apartment, and the third quarter rent growth further proves it,” Denton said. “The 4.0% growth is big. Nobody was really predicting that the market would reaccelerate this year.”
The top 25 metro areas by occupancy on a quarterly basis, among the top 50, in the third quarter of 2014 were:
Hartford-West Hartford-East Hartford, CT 97.1% 0.3%
Minneapolis-Saint Paul-Bloomington, MN-WI 96.9% 0.3%
New York-Wayne-White Plains, NY-NJ 96.9% -0.1%
Oakland-Fremont-Hayward, CA 96.8% 0.1%
San Jose-Sunnyvale-Santa Clara, CA 96.8% 0.3%
Nassau-Suffolk, NY 96.5% -0.9%
San Diego-Carlsbad-San Marcos, CA 96.4% 0.2%
Santa Ana-Anaheim-Irvine, CA 96.4% 0.8%
Edison, NJ 96.3% 0.5%
Denver-Aurora, CO 96.3% 0.3%
Miami-Miami Beach-Kendall, FL 96.2% 0.0%
Nashville-Davidson-Murfreesboro, TN 96.2% 0.0%
Warren-Farmington Hills-Troy, MI 96.2% 0.8%
Los Angeles-Long Beach-Glendale, CA 96.1% 0.3%
San Francisco-San Mateo-Redwood City, CA 96.1% 0.5%
Sacramento-Arden-Arcade-Roseville, CA 95.9% -0.2%
Portland-Vancouver-Beaverton, OR-WA 95.9% -0.3%
Seattle-Bellevue-Everett, WA 95.8% -0.4%
Boston-Cambridge-Quincy, MA-NH 95.8% 0.1%
Chicago-Naperville-Joliet, IL 95.8% 0.3%
Philadelphia, PA 95.8% 0.4%
Columbus, OH 95.8% -0.1%
Salt Lake City, UT 95.7% 0.0%
Fort Lauderdale-Pompano Beach-Deerfield Beach, FL 95.6% -0.2%
West Palm Beach-Boca Raton-Boynton Beach, FL 95.5% 0.2%
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