DALLAS--(BUSINESS WIRE)--Axiometrics Inc., a provider of data and analysis on the apartment market, indicates in its latest research findings that effective rent growth (rent net of concessions) slowed somewhat during August, to a rate of 0.34%. This was the lowest rate of growth since December of 2010. Despite the August slowdown, however, effective rent growth for 2011 is still poised to be higher than it was in 2010, which was itself a very strong year. In addition, the national occupancy rate moved up to 94.09%, with some markets approaching an overall “ceiling” for occupancy.
“Even with the slight slowdown in August, we are on course in 2011 to produce the third highest rate of annual effective rent growth since we have been tracking the market,” said Ron Johnsey, president of Axiometrics Inc. “Occupancy—with 35 of the top 88 markets having occupancy rates above 95%—showed surprising growth and might have been the biggest story this month.”
Effective Rent Growth
Through August, year-to-date growth in effective rent measures 5.17%. This compares to a rate of 4.72% over the same period in 2010. Assuming effective rent grows at the same rate in the next four months as it did in 2010, the full-year total would fall just below the historic highs of 2000 (6.18%) and 2005 (5.81%).
Effective rents have increased 9.96% overall since hitting a trough in December of 2009, however, there are significant differences by property class. Over the past 20 months, effective rents have increased 11.54% for Class A properties, 10.44% for Class B properties, but only 6.74% for Class C properties. Atlanta, Dallas, Houston, Miami, and Oakland have shown the greatest discrepancy in rent growth between Class A and Class C properties since December of 2009. On the flip side, Class A properties have underperformed Class B and C properties in Bethesda, Durham, Minneapolis, San Diego, and Santa Ana.
Eight of the top 13 markets for annual effective rent growth are in Northern California, Texas, and Colorado. San Jose, Denver, and Boulder have posted more than 6.00% annual rent growth for each of the past two years. Savannah, Seattle, and Dallas, which were bottom dwellers in terms of annual rent growth a year ago, now also find themselves among the top growth markets.
|Annual Effective Rent Growth|
|Market||Aug ’10||Rank||Aug ’11||Rank|
|San Jose, CA||5.82||%||11||14.31||%||1|
|San Francisco, CA||4.76||%||20||12.14||%||2|
|Colorado Springs, CO||4.99||%||15||6.91||%||12|
The national occupancy rate increased from 93.92% in July to 94.09% in August. This was the third highest monthly growth rate of the year, resulting in occupancy nearly a full point higher than it was at the beginning of the year.
Differences by property class are also evident for occupancy. Nationally, Class C properties average 91.2% occupancy, Class B 94.8%, and Class A 95.8%. In 68 of the 88 markets Axiometrics tracks, Class A properties have occupancy rates above 95%, indicating that any further growth in overall occupancy in these markets will likely have to come from the middle and lower tiers.
Axiometrics Inc. measures the performance of the apartment sector every month by surveying more than 16,500 properties and 4.4 million units. Learn more at www.axiometrics.com or by calling 214-953-2242.