Apartment rents in the U.S., already at record highs, have yet to cool down.
Effective rents, the amount tenants pay after concessions from landlords, climbed 1 percent in the second quarter from the previous three months to an average of $1,144, according to a report from Reis Inc. The pace of growth accelerated from 0.7 percent in the first quarter and 0.6 percent at the end of last year.
A jump in apartment construction in recent years so far hasn’t added enough supply to significantly boost vacancies, enabling landlords to charge higher rates. Rentals, which have surged in demand in the aftermath of the foreclosure crisis, are attracting people who don’t have the ability to buy and young millennials moving out on their own.
“It’s a lot of young single people, and it’s really owed to demographics,” said Ryan Severino, senior economist at Reis. “They’re coming out of school and they’re staking their claim in the world, and they’re what’s driving the market.”
The national vacancy rate remained the same as the previous quarter, at a historically low 4.2 percent. New supply was roughly in balance with the net increase in leased space, with 44,041 completions and leasing gains of 43,380 units.
Construction is poised to increase this year from 2014, which had the most building of new units since 1999, a sign the vacancy rate probably will rise, according to Reis. The third quarter may see a jump in completions as developers attempt to capture renters during a season where weather is favorable and people are more likely to move, Severino said.
“We’re still really waiting for the coming slug of supply to hit the market, and we haven’t seen it yet,” Severino said.
Another report released this week from Axiometrics Inc. showed a 5 percent year-over-year jump in national effective rents, the highest annual growth since 2011.
“At this point, affordability could become an issue in some markets, and the high rent-growth levels in other markets are unsustainable,” Stephanie McClesky, vice president of research for Dallas-based Axiometrics, said in a statement.
The Oakland, California, area led annual growth in effective rents, at 14.3 percent, Axiometrics said. It was followed by the Portland, Oregon, vicinity at 11.8 percent, and the Denver metropolitan area at 11.4 percent.
Axiometrics expects that 277,224 new units will come to the U.S. market by the end of 2015, an increase of 27 percent from last year.