Axiometrics Data Shows Positive but Slowing Effective Rent Growth for Apartment Market in Third Quarter

Market Now Expected to Increase Effective Rents 3.6% for Full Year

DALLAS, TX--(Marketwire - October 01, 2012) -  In its latest U.S. apartment market report, Axiometrics Inc. indicates that annual effective rent growth continued to moderate in the third quarter of 2012 with a national growth rate of 3.7%, which was down from 4.0% in the second quarter. For five consecutive quarters the annual rate of growth -- while still positive -- has slowed after peaking at 5.1% in the second quarter of 2011. As a result of the slowing growth, Axiometrics has lowered its 2012 full-year forecast for effective rent growth to 3.6%, though it expects the rate to increase in 2013 based largely on improving job growth and renter household formation.

Despite the slowdown in effective rent growth, the occupancy rate remains quite strong nationally. For the third quarter, occupancy measured 94.5%, which was an improvement from 94.3% in the second quarter, as well as from 94.1% in the third quarter of 2011. 

"Although effective rent growth has slowed, it is still strong by historical standards," said Jay Denton, vice president of research for Axiometrics. "For the month of August, 35 metropolitan statistical areas (MSAs) still posted annual rent growth of at least 4.0%, and 18 of them had growth above 5.0%. The slowdown we are reporting for the full third quarter bears watching as we move forward, especially as new supply continues to come online. However, in light of the extremely strong rent growth seen over the past few years, it is not surprising to see some moderation, especially with job growth remaining rather anemic. As usual, the dynamics continue to vary by market."

Effective Rents and Occupancy

Effective rents were increased less aggressively during the third quarter of 2012, growing 1.3% from the second to the third quarter versus an increase of 1.7% for the same period last year. For the month of August effective rents increased 0.33%, which was almost identical to the 0.34% sequential increase in August 2011.

Also in August, the top performing asset class for effective rent growth changed according to Axiometrics' data. For the first time since effective rents began expanding more than two years ago, Class C properties

took the top spot for annual effective rent growth during August, while the pace of rent growth for Class A properties slowed from a year ago. The slowdown in Class A annual effective rent growth is even more pronounced when comparing it to August 2011, when the growth rate reached 5.53%. Out of the top 88 MSAs that Axiometrics tracks, only 23 had stronger rent growth for Class A properties in August 2012 as compared to August 2011. 

REIT properties, which comprise approximately 12.0% of the Axiometrics database, have increased rents 6.73% year to date (YTD), as compared to 6.29% over the same period of 2011. In 2011, REITs lowered effective rents each month from August to December, but for this August they posted positive growth as a group despite some companies showing the first signs of seasonality.

The occupancy rate in August was up 89 basis points (bps) on a YTD basis and 26 bps on an annual basis. In August 2011 the occupancy rate was up 102 bps on a YTD basis and 58 bps on an annual basis. According to Axiometrics, while relative occupancy growth has slowed, the occupancy rate itself is at its highest point since the third quarter of 2006. 

Top and Bottom Performing Markets

In the third quarter San Francisco and San Jose remained the top markets for annual effective rent growth, though those markets are down from the peak growth rates they reported last year. While still sizzling, San Francisco's annual growth rate of 11.0% is down from its peak growth rate of 15.0% in the fourth quarter of 2011. San Jose, whose annual effective rent growth rate peaked at 14.0% in the third quarter of 2011, moderated to a rate of 8.8% growth this quarter.

Annual effective rent growth and occupancy rates for other notable markets include:

Denver   7.1%   95.3%
Houston   6.7%   93.3%
Seattle   5.4%   95.2%
Boston   5.4%   96.1%
Dallas   4.4%   94.5%
Orlando   3.7%   94.4%
Chicago   3.5%   95.2%
Los Angeles   3.2%   95.6%
New York   3.2%   97.0%
Atlanta   3.1%   92.5%
Phoenix   2.3%   93.0%
Las Vegas   -1.0%   91.7%

About Axiometrics
Axiometrics is the only multifamily research provider to survey every property in its database at the floor plan level every month. Every property. Every month. Only Axiometrics. Learn more at or by calling 214-953-2242. 

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Ross Coulter