RICHARDSON, TX—“Rent growth doesn’t have to reach best-ever readings to be strong,” says Greg Willett, chief economist at RealPage. The firm said Tuesday that while rent growth is expected to slow in the near term from the 5%-plus pace set in 2015, cooling to 3.8% in the year that just ended, it’s still well above historical norms.
RealPage says the nation’s 100 largest metro areas saw apartment demand of 328,559 units in 2016, up 24% from the previous year’s net move-in total. Demand recorded for ’16 was the third largest calendar year volume posted during the past three decades, just behind 2000 and 2010.
“The apartment sector’s winning streak has run seven full years so far,” Willett says. “Job production continues at solid levels, encouraging new household formation. While apartment construction is substantial, significant building is justified by the very strong demand tallies,” which last year exceeded deliveries by more than 30,000 units nationwide.
As is usually the case, fourth-quarter renter demand didn’t keep pace with deliveries. Q4 saw completion of 87,939 units nationwide, representing the biggest block of quarterly new supply seen since the mid-1980s.
Not only the pace but also the market concentration of new completions factored into the recent vacancy picture. Apartment occupancy stood at 96.3% at year’s end, up from 95.9% in late ’15, and RealPage notes that nearly all of today’s vacancies in most locales can be found in the very expensive brand new completions moving through initial lease-up. Conversely, “it can be very tough to find available units in the middle-tier to lower-end price ranges,” according to RealPage.
And while rent growth nationally is occurring at a slower pace lately, several metro areas are continuing to post above-average annual increases for new renters. Leading the way in ’16 was Sacramento at 9.3%, followed by Riverside-San Bernardino at 8.5%, Seattle at 7.8%, Phoenix at 7.1% and Las Vegas at 6.8%.
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