September 27, 2017
This article has been updated with statistics from RealPage’s Axiometrics
The apartment market continued to withstand the pressure from added supply in the third quarter, as the national vacancy rate increased only 10 basis points to 4.5%, according to the latest 3Q market report by Reis. RealPage’s Axiometrics also reported a 4.5% vacancy rate (95.5% occupancy). That was somewhat surprising, since so much underway construction was expected to push vacancy rates higher.
Axiometrics Vice President Jay Denton anticipated that occupancy could fall in the coming months, partly due to seasonality, and partly due to a supply increase.
Total inventory is still expected to increase significantly in 2017 and 2018, however, construction in the third quarter, 47,271 units, was again lower than expected. Reis Senior Economist Barbara Byrne Denham notes this number should be revised once things get settled in Florida and Houston – two areas that have seen significant construction this year.
Perhaps more importantly, asking rents increased 1% in the third quarter, while effective rents grew 0.9%, according to Reis. Meanwhile, metrics from Axiometrics noted that annual rent growth for Q3 held steady between 2.5%-3%.
The underlying strength in the apartment market was confirmed by the rent growth rates: only six metros experienced a decline in effective rent in the quarter. These healthy growth rates reflect an overall confidence that future demand or occupancy growth will continue to keep pace with expected supply growth, at least in most metros.
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