So far in 2017, almost 200,000 conventional units have been absorbed and nationally the average occupancy rate is at 92.2%. That represents a growth of 0.3% in occupancy over the last six months and a national growth in occupancy of 0.1% since last month. Nationally, effective rents are up 2.9% through the last two quarters to an average of $1237 per unit and $1.39 per square foot.
These are certainly welcome numbers; however, some markets should heed some warning signs. While rents rose in all but a few markets, a third of the markets we track saw average occupancy drop in the last two quarters.
View the full monthly Market Stats PDF here
Markets in Texas and North Carolina had good absorption, yet a lot of new construction outpaced rentals and average occupancy fell. Charlotte and Raleigh-Durham absorbed a combined 3500 units yet in the same time frame added more than 6000 units to the market. In Dallas-Fort Worth more than 13,000 units came on the market while a net 9300 more units were rented from the beginning of the year. San Antonio, however, managed to absorb 2700 net rented units while adding about 2000 units to the rental supply.
| Effective Rent Growth Top 5 (100K+ Units) | YE 2016 | 2Q 2017 | Change |
|---|---|---|---|
| National | $1,202 | $1,237 | 2.9% |
| WA - Seattle | $1,515 | $1,634 | 7.8% |
| CA - Sacramento | $1,244 | $1,317 | 5.9% |
| CO - Denver/Co Springs | $1,289 | $1,366 | 5.9% |
| NY - New York City | $2,368 | $2,504 | 5.7% |
| OH - Cincinnati/Dayton | $814 | $861 | 5.7% |
Markets in California and Ohio saw absorption levels drop from their averages of the last few years. The California markets of Sacramento, San Bernardino and San Diego all combined for less than 2000 net rented units in the first half of the year. Each of those markets also saw rents rise more than 4% over the last six months. Something will need to give over the next six months if they want to retain solid occupancy numbers.
There are several parts of the country that are still going strong
Florida markets, for one, saw good numbers for the first part of the year. Tampa had average occupancy increase 0.9% to an average of 92.7% while still raising rents an average of 2.7%. Even with the addition of more than 2000 new units, Miami saw average occupancy rise 0.9% to 89.9%. Orlando added more than 2000 units to the market, yet absorption managed to outpace new supply and occupancy rose 0.2% from the beginning of the year.
| Occupancy Growth Top 5 (100K+ Units) | YE 2016 | 2Q 2017 | Change |
|---|---|---|---|
| National | 91.9% | 92.2% | 0.3% |
| OH - Columbus | 93.0% | 94.4% | 1.5% |
| CA - San Francisco/Oakland | 92.0% | 93.4% | 1.5% |
| OR - Portland | 92.5% | 93.4% | 1.0% |
| FL - Miami/Ft Lauderdale | 89.1% | 89.9% | 0.9% |
| FL - Tampa | 91.9% | 92.7% | 0.9% |
The Pacific Northwest markets are turning in good numbers as well. Portland raised rents 2.8% and average occupancy rose 1% to 93.4% over the last 6 months. Seattle added more than 4000 units but absorption of almost 6000 units pushed occupancy up 0.9% to 93.5%.
In the Southwest, Las Vegas and Phoenix saw mid-year rent gains of more than 4% while still having occupancy gains of 0.9% and 0.4% respectively.
Demand is still solid
Both on a national level and on a regional level, the multifamily markets seem to be chugging along in 2017. The main concerns seem to be the individual and isolated markets that are becoming saturated with new product. The good news is that demand is still solid. Price increases will have to be deferred and if they can tap the brakes on development hopefully the rental demand can catch up with the new supply in those markets.
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