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Solid 2nd quarter demand made up for previous losses, pushing occupancy in Los Angeles/Orange County to 96.6% as of June, a rate that is back in line with the national average after falling to a low of 95% in June of last year. Apartment operators responded to rebounding occupancy by pushing rents by 3.5% in the year ending June. While still only rising at about half the level of the national norm, rent growth in Los Angeles/Orange County is quite a change from the price cuts that got as deep as 5.1% not long ago in October of 2020.
Chicago absorbed over 10,000 apartment units in the 2nd quarter, making up for some net move-outs seen earlier in the pandemic and taking annual demand to over 7,300 units. Apartment occupancy climbed 110 basis points (bps) in the past year to stand at 95.6% in June. While still behind the national norm, that is the strongest performance Chicago has seen since August of 2019. In the year ending June, effective asking rents grew 2.3%. While this performance was still well behind the national average, it was the first time Chicago saw the return of rent growth since annual price cuts started back in May 2020.
Washington, DC absorbed over 8,100 apartments in the 2nd quarter, accounting for most of the market’s annual demand volume of over 9,750 units. While apartment demand here never did fall into negative territory, it did fall well behind concurrent completion volumes, which are some of the most aggressive nationwide. Occupancy has rebounded slightly, hitting a few ticks ahead of the five-year average at 95.8% in June. While annual rent growth in Washington, DC seems insignificant at just 0.1%, this was the first time price increases returned after rent cuts were the norm for this market since May 2020.
The three Bay Area markets of San Francisco, San Jose, and Oakland logged sizable quarterly demand for 7,920 units, making up the bulk of annual demand of 8,380 units. The return to solid demand was especially significant for the Bay Area, which was one of the worst-suffering markets during the deepest declines of the COVID-19 pandemic. At its worst, annual net-move-outs in the Bay Area got as deep as 5,530 units in 2020’s 3rd quarter. The return of positive demand pushed occupancy up to 95.1% in the Bay Area in June. While that figure is a bit behind the region’s five-year average, it is well ahead of the low point of 93.6% logged as recently as February 2021. The Bay Area is one of only a handful of regions in the nation where rent change has not made it back to positive territory just yet. Prices were cut 5.9% year-over-year as of June, though that is notably better than the double-digit rent cuts the region was seeing just a few months ago.
New York – another expensive gateway market where apartment fundamentals were hard-hit by the COVID-19 pandemic – saw a significant rebound in demand in the 2nd quarter when over 7,000 apartment units were absorbed. While healthy quarterly demand made up for some of the net move-outs seen earlier in the pandemic, however, annual absorption remained negative, with a loss of over 25,000 units, on the net. While demand boosted occupancy to 95.9% as of June, well ahead of the low point from February, this rate was still 100 bps below the year earlier showing. Thus, New York is the only major market where occupancy is still down year-over-year. Rents are also still being cut on an annual basis as well, but cuts of 8.4% are much better than the annual declines that got as deep as 15% not long ago in March 2021.
In the April-June time frame, Seattle absorbed nearly 5,900 apartment units, accounting for a sizable portion of the 7,260 units of demand seen in the year-ending 2nd quarter. This annual showing was close to hitting the market’s five-year norm and nearly matched concurrent supply volumes for the first time since the 1st quarter of 2020. Seattle apartment occupancy climbed to 96.1% in June, notable progress from the recent low of 93.8% logged at the end of 2020. Seattle didn’t see rent cuts get as deep as what was seen in the Bay Area and New York in the COVID-19 era, but this market has also yet to pull itself out of price decline. As of June, effective asking rents were down a modest 0.3% year-over-year. This is the mildest annual decline this market has seen since operators turned to price cuts in July 2020.
Northern New Jersey
Newark absorbed 5,100 units in the 2nd quarter, just missing out on a top 10 national performance. This recent boost pushed annual demand to nearly 9,570 units, the market’s best showing since the 3rd quarter of 2018. Furthermore, demand is back to pacing close to annual apartment supply, which has been at some of the nation’s strongest in the past year. Occupancy has rebounded in recent months, climbing to 96.7% in June, quite an improvement from the low point of 95.8% seen in March 2021. As a result, annual rent growth returned, albeit at mild amounts at 0.5% in the year ending June. Just a few months ago, when Northern New Jersey was at its worst, rents were being cut by 3.3% on an annual basis.
In Boston, apartment demand hit a solid 4,930 units in the April-June time frame, also just missing out on a top 10 national rate. This recent performance made up about half of Boston’s annual absorption of 9,430 units, the market’s strongest annual demand performance in at least a decade. Recent demand pushed occupancy up to 96.4% in June, pacing well ahead of Boston’s five-year average. Boston was another gateway market that saw the return of annual rent growth in June. Prices were up by 1.3% year-over-year after deep cuts were instituted throughout much of 2020.