Despite Weak Job Growth, Apartment Market Results Remain Strong According to Latest Axiometrics Report

Fifty-two of top 88 markets have increased rents 3.0% or more this year; rent concessions at near record lows

DALLAS--(BUSINESS WIRE)--Axiometrics Inc., a provider of data and advisory services on the apartment market, indicates in its most current report that, even with the weak job growth numbers recently reported by the Bureau of Labor Statistics (BLS), the apartment market continued to soar in May, with effective rents up 0.74% for the month and 3.29% year-to-date (YTD).

“This summer will provide the first wave of new supply for many submarkets across the country and while, so far, new property lease up is not significantly impacting Class A assets in their markets, it is a trend we will be watching in the coming quarters”

In May, the national occupancy rate also increased 9 basis points (bps), from 94.16% to 94.25%, a level not seen since 2006. As a result of the tighter occupancy, concession values (the amount by which asking rents are lowered to get to effective rents) have reached near record lows, resulting in fewer up front deals for renters. A value of negative 8.33% is equivalent to one month of free rent on a 12-month lease. The national concession value fell to negative 2.28% in May. Thus, in many markets the best deal for renters of existing properties is now often just one WEEK of free rent, and even less for Class A properties.

“This summer will provide the first wave of new supply for many submarkets across the country and while, so far, new property lease up is not significantly impacting Class A assets in their markets, it is a trend we will be watching in the coming quarters,” said Ron Johnsey, president of Axiometrics. “Unfortunately for apartment dwellers, at this point we anticipate effective rents remaining on their upward trajectory throughout the rest of the year, though continued weak or even negative job growth may begin to moderate some of these increases. As we complete our updated forecast for the second half of the year in July, we’ll have a clearer view of whether rent increases will match our previous, bullish, full-year forecast of 5.1%.”

Effective Rents and Occupancy

Axiometrics reports that Class A properties continue to show the strongest rent growth and highest occupancy rate. However, when combining occupancy growth and rent growth, Class C properties generated the highest growth rates for owners/landlords in terms of revenue during May, both YTD and on an annual basis.

Nationally, nearly all of the positive absorption year-over-year is occurring in Class C and new lease up properties. For example, in December 2009, Class C properties in 41 of the top 88 markets had an occupancy rate below 90%. Today, that count has decreased to just 18 markets.

Performance By Asset Class

Class	Effective Rent Growth		Occupancy Rate	Occ Growth (bp)		Revenue Growth
	YTD	Annual	May ‘12	YTD	Annual	YTD	Annual
A	3.58%	4.65%	95.5%	45	-7	4.07%	4.57%
B	3.49%	3.86%	94.8%	62	0	4.17%	3.85%
C	3.32%	4.15%	92.0%	102	79	4.47%	5.05%
Based on data through May 2012
Revenue Growth is calculated by multiplying the effective rent by the occupancy rate and taking the change between the periods.

Top and Bottom Markets

Axiometrics notes in its research that the top markets for effective rent growth do not necessarily have the highest occupancy rates or occupancy growth. For example, San Francisco, which is an A market and almost always one of the top 10 markets for rent growth, has neither an overall occupancy level or occupancy growth rate that ranks in the top 10 of the largest 88 markets. Rather than reach a 100% occupancy level, San Francisco acts like A properties in Axiometrics’ dataset—stay at 96% occupancy and maximize effective rent growth.

Axiometrics also reports that none of the top 10 markets for YTD occupancy growth are in the top 10 for YTD rent growth. Salt Lake City is the closest, at 12^th. Birmingham, Cleveland, Fort Lauderdale, and West Palm Beach are among the 10 best markets for YTD occupancy growth, each having increased occupancy by at least 1.61% since the beginning of the year.

Current YTD ERG Rank	MSA Name	Effective Rent Growth (ERG)								Occupancy Rate And Growth (bp)
		YTD ‘11		YTD ‘12		May Annual		Since Dec ‘09		May ‘12		YTD	Ann
1	San Jose, CA	10.9	%	8.4	%	8.2	%	31.5	%	96.6	%	58	-80
2	Boulder, CO	3.4	%	6.7	%	5.4	%	19.2	%	96.5	%	68	14
3	San Francisco, CA	7.1	%	6.3	%	14.8	%	30.8	%	96.0	%	10	-25
4	Seattle, WA	6.9	%	6.1	%	4.5	%	18.5	%	95.5	%	92	-23
5	Nashville, TN	2.7	%	5.8	%	5.8	%	17.3	%	95.7	%	99	92
6	Louisville, KY	3.7	%	5.6	%	6.1	%	13.3	%	96.0	%	119	23
7	Charlotte, NC	5.1	%	5.3	%	7.4	%	17.4	%	94.5	%	67	85
8	Hartford, CT	3.5	%	5.2	%	5.8	%	15.5	%	96.4	%	83	75
9	Salt Lake City, UT	1.9	%	5.1	%	6.0	%	9.4	%	96.2	%	152	143
10	Cape Coral, FL	5.3	%	4.9	%	4.2	%	7.6	%	94.2	%	131	187
79	Tulsa, OK	1.1	%	1.5	%	2.8	%	5.4	%	91.9	%	-1	63
80	Winston-Salem, NC	0.9	%	1.1	%	2.4	%	5.7	%	92.7	%	25	79
81	Tucson, AZ	0.8	%	1.0	%	2.1	%	3.5	%	91.4	%	-4	38
82	Phoenix, AZ	2.6	%	1.0	%	1.8	%	10.4	%	92.7	%	54	16
83	Tacoma, WA	1.1	%	0.9	%	-1.4	%	7.0	%	92.8	%	-67	-116
84	Virginia Beach, VA	1.9	%	0.7	%	-0.7	%	2.6	%	92.9	%	-28	-161
85	Las Vegas, NV	0.6	%	0.7	%	-0.9	%	-3.0	%	92.0	%	33	1
86	Albuquerque, NM	1.3	%	0.2	%	0.0	%	8.1	%	93.4	%	-25	-165
87	Detroit, MI	2.3	%	0.1	%	4.3	%	9.2	%	94.0	%	27	-44
88	Palm Bay, FL	1.1	%	-0.6	%	-0.1	%	7.0	%	92.2	%	178	203
	National	3.3	%	3.3	%	4.1	%	12.4	%	94.3	%	66	19
The use of bold indicates the market ranks in the top 10 of 88 markets measured for this category.
The use of italics indicates the market ranks in the bottom 10 of 88 markets measured for this category.

About Axiometrics

Axiometrics Inc. measures the performance of the apartment sector every month by surveying more than 20,000 properties and 5.5 million units. Learn more at www.axiometrics.com or by calling 214-953-2242.