Axiometrics Inc., the leading provider of apartment data and market research, reported last week that the national apartment market averaged a healthy 3.85% effective rent growth rate in 2012, down slightly from an average of 4.75% in 2011.
While Axiometrics expects some moderation across different markets this year, especially as new supply begins to come online in much larger numbers, it is forecasting effective rent growth to remain positive in 2013 at an average rate of 3.6%.
The firm is also tracking almost 164,000 new units that are scheduled for delivery in 2013, nearly double the 2012 delivery total of approximately 86,000 units.
Nationally, annual effective rent growth finished 2012 at a rate of 3.72% in December and an average of 3.85% for the year. The annual growth rate remained in a steady range between 3.60% and 3.84% over the last seven months of 2012.
REIT properties in Axiometrics’ database finished the year with 4.73% effective rent growth in December. While Axiometrics is forecasting all apartment properties to average a combined 3.6% in annual effective rent growth in 2013, the REITs are expected to perform slightly better at an average rate of 4.1%.
Class C properties finished the year with the most improved effective rent growth rate. Compared to December 2011, annual effective rent growth increased from 3.4% to 4.3% for Class C properties.
Class B properties were fairly consistent over the same period, improving just slightly from 3.8% to 3.9%.
Annual effective rent growth slowed throughout 2012 for Class A properties, however. After finishing 2011 at a rate of 4.9% annual effective rent growth, Class A properties slipped to a rate of 3.4% by the end of 2012.
The national occupancy rate inched up in 2012, averaging 94.2% as compared to 93.9% in 2011. This was the first time the national occupancy rate finished the year above 94.0% since 2006.
Axiometrics is forecasting the national average occupancy rate for stabilized product to rise yet again in 2013, to an average rate of 94.9%. In order to achieve this growth in occupancy, Class C properties will need to maintain the momentum they generated during 2012.
Class A properties’ average occupancy in December was 94.9%; the first time at the national level the group averaged less than 95.0% occupancy since February 2011. While no definitive trend can be established at this point, Axiometrics notes that this rate will receive closer scrutiny in the coming months to determine if the decline below 95.0% for Class A properties is attributable to normal seasonality or whether it may indicate an impact from the growth of new supply.
As of late December 2012, Axiometrics was tracking 226,674 apartment units that were under construction but had not yet begun leasing (this figure includes only market rate units at complexes of 40 units or larger, and does not include student, senior, affordable, or condo properties). At the same time, there were 120,067 units in lease up, of which 40,369 units were at properties where construction had not yet finished.
New construction continued to increase in 2012, translating into more deliveries in 2013, with a concentration in Washington, DC; Dallas; New York; Seattle; Austin; and Houston.
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