Stabilized Properties Feeling the Squeeze

In recent blog posts, both this year’s decline in apartment demand and its lack of impact so far on multifamily rent growth have been discussed. One viewpoint that is useful in parsing industry performance that has not been covered here since last year is evaluating only stabilized properties.

For a closer look at just that, conventional properties of at least 50 units will be used, and only properties that entered the year already stabilized.

Net Absorption and Average Occupancy

There has been a net loss of about 29,000 leased units though May nationally among properties that entered the year already stabilized. In the last five years the only other negative value for the same portion of the calendar was in COVID-affected 2020. Aside from 2020, the previous low in that five-year period was a net gain of about 57,000 leased units, and this year’s negative move was a far cry from last year’s approximately 130,000 net absorbed units.

From the perspective of price class, only Class A stabilized properties managed to avoid shedding net leased units in the first five months of the year, but barely so. Net absorption of about 1,400 units was 95% lower than last year’s total for the same period and was even 75% lower than in pre-pandemic 2019.

For the remaining three price classes a net loss of a little more than 14,000 leased units for stabilized Class C properties was the largest loss. However, Class B and Class D properties also saw dramatic declines in leased units. Net absorption through May for Class B properties was negative by about 7,600 net units and for Class D the loss was by roughly 6,100 net units.

Average occupancy for properties to enter 2022 already stabilized closed May just above 95% even with negative net absorption after a small decline of 0.3% from the start of the year. Occupancy remaining unusually high thanks to last year’s apartment demand explosion is one reason why rent growth momentum has continued months beyond the collapse in net absorption.

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Average Effective Rent and Lease Concessions

Average effective rent for properties that entered the year stabilized closed May at $1,615 per month after a 4.7% increase from the beginning of the year. This gain was not only well above anything from the pre-pandemic period, but also surpassed last year’s 3.4% appreciation in the same period.

Unsurprisingly, effective rent growth has been strongest for stabilized Class A properties. Even so, the 5.4% Class A gain was not far from the 5.1% Class B gain. Class C properties were right behind with an increase of 4.7% while the 3.3% gain for Class D properties was the lowest of the price tiers. For each of these subsets, the 2022 increase through May was the highest of the last five years.

Despite entering the year with lease concession availability well below the typical level, stabilized properties finished May with only 7% of properties offering a discount for new leases after a further decline so far this year. In the few years prior to 2020, a usual availability for May was around 12% of properties offering a discount.

Similarly, after a continued decline so far in 2022, the average concession package value ended May at just under three weeks off an annual lease. This average value is more in-line with that from 2018 and 2019 and represents a decrease from an average of nearly four weeks off an annual lease from this time last year.


National net absorption so far this year has been significantly lower than in previous years, but even that lower total obscures the squeeze stabilized properties have experienced. Aside from just stabilized properties, Class A more generally has been the most resilient price class in terms of apartment demand this year for a variety of reasons.

Demand in lease-up properties, which are usually Class A, has accounted for essentially all net absorbed units so far this year – an indication of price pressure from the last year’s rent growth and from inflation in the broader economy that is affecting non-premium multifamily. Short of a rebound in demand, and there is seemingly little reason to expect one in the short term, increased lease concession availability and slower rent growth are both likely to materialize for stabilized properties in the coming months.

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