Rentals: The Wave of the Future?
A new report on the nation’s multifamily housing industry indicates that the apartment sector posted a strong economic position in 2013, remaining consistent with years past. Experts attribute much of this improvement to strong demand, which outpaced supply in 2013. Local accounting firm RubinBrown’s 2014 Apartment Statistical Data is now available at www.rubinbrown.com. The report pools audited operational data from 420 apartment projects in 30 states and represents averages in a variety of markets.
Most notable is the growth in rents, as indicated by REIS, as the national average for 2013 reflected a 3.6 percent increase in rents over 2012 versus a historical measure of approximately 2.8 percent year over year. Additionally, vacancies posted a rate of 4.1 percent throughout the country in 2013 over a 5.4 percent rate historically.
“In the coming years, a decline in single family home rentals is expected, resulting in approximately one million households to enter into the multifamily housing industry or home ownership,” said Bryan Keller, CPA, partner-in-charge, RubinBrown’s Real Estate Services Group. “While the decline in rental vacancies in recent years has been attributed to Generation Y’s favorability towards renting versus home ownership, interestingly, Baby Boomers are starting to move out of home ownership and start renting. This is attributed to the flexibility and convenience that demographic is starting to value Additionally, heavy student debt loads and tougher lending standards, especially for first –time buyers have had a positive impact on the multi-family rental sector.”
Keller notes that, according to the Joint Center on Housing Studies of Harvard University, the industry could face an increase of 4.7 million more renter households by 2023. These trends are helping spur property value appreciation to pre-recession levels and bring multifamily investors back to the market.
However, looking forward, the discrepancy between supply and demand is slowly disappearing as multifamily construction starts rose 20 percent over 2012 and 80 percent over 2011, according to Freddie Mac. Additionally, the industry is facing a critical issue in aging stock as the 2012 American Community Survey published by the U.S. Census Bureau indicated that roughly 60 percent of U.S. rental properties with 20 or more units were built prior to 1980.
Average monthly rent slightly increased over 2012, from $699 up to $702, while economic occupancy in 2013 also increased to 90.8 percent over 88.6 percent in 2012. Although gross potential rent decreased in 2013 to $8.85, net operating income increased $3.08.
Regionally, the Midwest recorded the lowest average monthly rent per unit at $660, compared to the highest in the East/Northeast at $824 per month. The Midwest had the third highest net operating income per square foot of all regions at $3.10, and the lowest economic occupancy levels at 89.6 percent. The South/Southeast averaged the lowest net operating income per square foot at $2.17, nearly 23.00 less than the East/Northeast, which had the highest. Economic occupancy levels were the highest in the West/Northwest at 94.9 percent, followed by the North at 92.4 percent.
RubinBrown is one of the nation’s largest accounting and business consulting firms, with more than 450 team members working from offices in Denver, Kansas City and St. Louis. Founded in 1952, the firm’s reputable, award-winning team members establish best practices within specific industry segments and work to serve the community both inside and outside the workplace. Our mission is to help clients build and protect value, while at all times honoring the responsibility to serve the public interest. RubinBrown is an independent member of Baker Tilly International, a high-quality, dedicated network of 156 independent firms in 131 countries. For more information, visit www.rubinbrown.com.
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