RealPage® MPF Research Division Reports Moderate Growth of U.S. Apartment
Rents in First Quarter 2013
Local performances converge near the national norm, leaving relatively few
especially strong or especially weak individual performers
CARROLLTON, Texas -- April 2, 2013
Effective rent growth for new leases in U.S. apartments registered at 2.6
percent as of first quarter, according to MPF Research, the industry-leading
market intelligence division of RealPage, Inc. (NASDAQ: RP). Growth seen
specifically in the January-March time frame came in at 0.5 percent. MPF
Research analysts highlight the nation’s latest apartment rent growth
statistics as well as other key performance indicators in a discussion found
The annual rent growth pace is continuing to cool from its recent high of 4.8
percent seen at the end of 2011. Top-end apartment communities, in particular,
are seeing prices rise more modestly. Rents grew 1.9 percent during the past
year in the stock built since 2000, compared to increases of 2.4 to 2.9
percent in older product segments. When rent growth peaked just over a year
ago, prices were rising 4 to 5 percent across all apartment product niches.
Pricing decisions are beginning to be impacted meaningfully by the wave of new
apartment supply that lies just ahead, according to the MPF Research analysis.
“Many owners and operators at the best properties want to be sure that their
apartments are completely full when deliveries of new units ramp up during the
coming months,” said Greg Willett, MPF Research vice president. “In turn,
smaller price increases at the top-of-the-market projects are leaving a little
less room for big rent bumps in the older stock.”
While the pace of rent increases is slowing, pricing continues to set all-time
highs. Pricing has jumped 10.8 percent from the recession-induced low seen in
late 2009, and rents are up 4.8 percent from the pre-recession high posted in
the middle of 2008.
Among large individual metros, the three Bay Area markets of San Francisco,
Oakland and San Jose rank as the country’s rent growth leaders. During the
year that ended in first quarter, effective prices for new leases jumped 6.3
percent in both San Francisco and Oakland, while the upturn proved nearly as
strong at 5.6 percent in San Jose.
Annual Rent Growth Leaders
Rank Metro Growth
1 (tie) San Francisco 6.3%
1 (tie) Oakland 6.3%
3 San Jose 5.6%
4 Denver-Boulder 5.4%
5 Austin 4.9%
6 Seattle-Tacoma 4.2%
7 Portland 3.9%
8 Houston 3.8%
9 New York 3.6%
10 West Palm Beach 3.3%
Annual rent growth also topped 5 percent in the Denver-Boulder area, where the
increase registered at 5.4 percent. Rents jumped 4.9 percent in Austin and 4.2
percent in Seattle-Tacoma. Other large markets recording rent growth well
above the national norm were Portland, Houston, New York and West Palm Beach,
all realizing increases of 3.9 to 3.3 percent respectively.
At the next level of performance, big markets posting rent growth of 2.7 to
2.8 percent, or just a bit above the national average, were Pittsburgh,
Detroit, Minneapolis-St. Paul and San Antonio.
Apartment rents were cut during the past year in a couple of big markets.
Pricing declined 1.0 percent in Las Vegas and 0.6 percent in Virginia
Beach-Norfolk. Sizable spots with annual rent change barely in positive
territory were Sacramento, where pricing inched ahead 0.2 percent, and
Memphis, where growth was held to 0.3 percent.
Rent growth has slowed nationally despite the fact that apartment occupancy
rates remain very tight. Average occupancy of 94.8 percent registered in U.S.
apartments as of first quarter, down a tenth of a percentage point both
quarterly and annually.
“Apartment occupancy rates are holding at very strong levels,” according to
Willett. “Even with a mild increase in the number of households leaving the
apartment sector to buy homes, apartment demand is proving reasonably healthy.
Helping support the market, job creation for young adults is proving strong
enough to spur some new household formation among those who had been living at
home with mom and dad.”
Demand for 86,569 apartments was posted across the country’s 100 largest
metros during the year, ending in first quarter, according to the MPF Research
data. That product absorption figure registers mildly below completions
totaling 107,626 units. Specifically during first quarter, demand came in at
11,633 units, compared to completions of 27,346 units.
MPF Research anticipates that apartment rent growth will accelerate slightly
to get back to the mark of 3 percent as 2013 progresses, before the pace of
increase cools once again to around 2.5 percent in 2014. “The completions on
the way over the next few months appear likely to perform very well without
damaging the occupancy performances of the already-existing stock,” Willett
said. “That should give operators of the current apartment base the confidence
to push a little harder on rent increases. As we get into 2014, however, the
amount of new product moving through initial lease-up should be large enough
to slow pricing momentum to some degree.”
Located in Carrollton, Texas, a suburb of Dallas, RealPage provides on-demand
(also referred to as “Software-as-a-Service” or “SaaS”) products and services
to apartment communities and single family rentals across the United States.
Its on-demand product lines include OneSite® property management systems that
automate the leasing, renting, management and accounting of conventional,
affordable, tax credit, student living, senior living and military housing
properties; LeaseStar™ multichannel managed marketing that enables owners to
originate, syndicate, manage and capture leads more effectively and at less
overall cost; YieldStar® asset optimization systems that enable owners and
managers to optimize rents to achieve the overall highest yield, or
combination of rent and occupancy, at each property; Velocity™ billing and
utility management services that increase collections and reduce
delinquencies; LeasingDesk® risk mitigation systems that are designed to
reduce a community’s exposure to risk and liability; OpsTechnology® spend
management systems that help owners manage and control operating expenses; and
Compliance Depot™ vendor management and qualification services to assist a
community in managing its compliance vendor program. Supporting this family of
SaaS products is a suite of shared cloud services including electronic
payments, document management, decision support and learning. RealPage’s
MyNewPlace® subsidiary is one of the largest lead generation apartment and
home rental websites, offering apartment owners and managers qualified,
prospective residents through subscription, pay-per-lead and LeaseMatch^TM
pay-per-lease programs. Through its Propertyware subsidiary, RealPage also
provides software and services to single-family rentals and low density,
centrally-managed multifamily housing. For more information, call
1-87-REALPAGE or visit www.realpage.com.
Greg Willett, 972-820-3262
Rhett Butler, 972-820-3773
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