Q3 2015 Apartment Trends
Q3 2015 Apartment Trends – After holding steady at 4.2 percent for the first two quarters of 2015, the national vacancy rate rose by 10 basis points to 4.3 percent during the third quarter. We have been expecting that vacancies would rise given the amount of new supply coming online. Vacancies have been bouncing around at these levels for the last two years, with a similar 10 basis point increase in the third quarter of 2014 (only to fall once again at the start of 2015). Overall, market fundamentals remain tight.
Asking and effective rent growth was very impressive, rising by 1.4 and 1.5 percent respectively. On a year-over-year basis, asking rents rose by 4.2 percent, and effective rents rose by 4.3 percent. These are robust figures, strong enough to fuel the hopes of optimists banking on resilient rent growth even if occupancies stay flat or deteriorate. For perspective, apartment rent growth has not been this strong (on a year-over-year basis) since 2007.
Supply and Demand Trends
Over 40,000 units were brought to market during the third quarter, which is less than the second quarter figure; yet – vacancies rose. It is only in retrospect that we will be able to proclaim this third quarter rise in vacancy as a true inflection point, but if the market is showing signs of being unable to absorb 40,000 units of new construction, what will happen when close to 100,000 units come online over the next quarter or two, as our latest projections show? Fundamentals remain tight, but it will be interesting to see where the intersection of demand and supply plays out over the next few quarters.
We expect national vacancies to rise modestly over the next few years, but we’re not very worried about the multifamily sector if these projections come to pass – vacancies will be in the low to mid 5s by 2019, which doesn’t portend lean times ahead.
Source: Reis by Victor Calanog on Dec 8, 2015