The summer months of June, July and August saw a return to more typical demand compared to the more difficult spring months of 2020. Even so, average effective rent remained flat rather than the robust summer growth those in the industry are accustomed to. Rent performance differed quite a bit based on floorplan type, or number of bedrooms, with efficiency units being especially hard hit.
Using conventional properties of at least 50 units, let’s take a closer look at nationwide summer rent growth.
Efficiencies and One-Bedrooms
The average efficiency unit rents for a full dollar per square foot more than any other unit type. This premium makes it unsurprising that summer rent growth underperformed compared to other floorplans at a time when price sensitivity seems to be on the rise among residents. Average market rent fell by 0.5% from the start of June through the end of August. Average effective rent fell by 1.3% as both the availability of rent concessions and the average value of the discount rose for these units.
For one-bedroom units, asking rent rose slightly by about 0.3% but average effective rent fell by 0.1%. The availability and average value of rent concessions increased for these units as well, but not quite to the extent of the efficiency units. Interestingly, one-bedroom units that include a den lost 0.2% in average effective rent and saw a larger increase in reliance on discounts than either efficiency or one-bedroom floorplans. There has been some thought that these units might see an uptick in demand given an increase in remote work, but no such move was yet reflected in summer price changes.
Takeaways Episode 32
Two and Three-Bedrooms
Average asking rent increased by just less than 0.5% for two-bedroom floorplans during the summer, with average effective rent managing a 0.2% gain. While the one-bedroom units with a den very slightly underperformed the one-bedroom units, two-bedroom floorplans that include a den performed marginally better than two-bedrooms without a den.
Three-bedroom floorplans enjoyed the largest average rent gains of the summer, though the bar was quite low. Average asking rent rose 0.8% and average effective rent crossed 0.5% growth. Three-bedroom units including a den did not experience the same level of rent growth but did see a slight increase of 0.2%.
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