New Supply to Double 2012 Rates in 2013, With Almost One-Third of Deliveries Concentrated in Six Markets
DALLAS, TX--(Marketwire - January 17, 2013) - Axiometrics Inc., the leading provider of apartment data and market research, reported today 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.
"The apartment market produced steady, solid results in 2012, though many MSAs were down from the peak rent growth levels seen in the summer of 2011," said Ron Johnsey, president of Axiometrics. "Overall rent growth in 2013 is forecasted to be relatively the same as it was in 2012, but we expect to see more variation across MSAs as effective rent growth increases in some markets but moderates in others. As always, the numbers can change depending on key factors such as continued job growth, consumer acceptance of rent increases for a fourth consecutive year, and absorption of new supply."
Effective Rent Growth and Occupancy
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.
|National Performance By Asset Class|
|Ann Occ Growth
|Revenue growth is calculated by multiplying the effective rent by the occupancy rate and taking the change between periods|
|Source: Axiometrics Inc.|
Top and Bottom Performing MSAs
While annual growth rates have moderated for most MSAs over the past 18 months, 40 of the top 88 MSAs had an annual effective rent growth rate of 4.0% or better in December 2012. Even with the normal seasonal decline, 57 MSAs had an occupancy rate above 94% to close the year. The following table displays the top 5 and bottom 5 MSAs (along with a few other notable markets) for annual effective rent growth rates.
|Top and Bottom Performing MSAs in 2012|
|Dec '11||Dec '12||Dec '12||Dec '11||Dec '12|
|3||San Francisco, CA||15.1%||7.2%||95.0%||12||-114|
|7||San Jose, CA||10.5%||6.8%||95.6%||5||-53|
|34||New York, NY||4.0%||4.0%||96.6%||63||0|
|51||Los Angeles, CA||4.2%||2.9%||95.4%||115||42|
|85||Las Vegas, NV||-1.2%||-0.5%||91.1%||68||-50|
|Source: Axiometrics Inc.|
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. However, while almost 150 MSAs will see new units delivered in 2013, nearly one-third of the nation's deliveries will be concentrated in six MSAs: Washington, DC; Dallas; New York; Seattle; Austin; and Houston.
|MSAs Delivering the Most Units in 2013|
|MSA||Total UC*||Units Delivered||Total Planned**|
|New York, NY||20,913||4,013||8,247||56,628|
|Los Angeles, CA||9,299||546||4,238||22,475|
|*Total under construction includes units that will not deliver units until 2014 or later.|
|**Not all planned units will progress to the construction stage.|
|The delivery schedules are based on individual properties tracked by Axiometrics that have already started construction. Delivery schedules are subject to change.|
|Source: Axiometrics Inc.|
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 www.axiometrics.com or by calling 214-953-2242.