The Radix Review: Multifamily Trends Explained
Rents Keep Closing the Gap as Leasing Cools into Fall
Multifamily Operational Results The national multifamily market held close to flat during the week ending September 13, with occupancy running within a rounding error of last year. Average U.S. occupancy was 94.56%, down 2 basis points week over week and just 9 basis points below the same period last year. Leased occupancy was 97.00%, down 8 basis points on the week and trailing last year by 9 basis points. Occupancy is off 32 basis points from a month ago, the expected seasonal give-back now that the summer leasing window has closed, which makes the annual comparison the more meaningful read. Leasing activity continued to ease with the calendar. Properties averaged 2.3 new leases signed during the week, down 0.2 week over week, against 2.5 in the same week last year. The annual comparison slipped to 0.2 below last year after two weeks running level. That is a modest step back rather than a turn in demand, and velocity is still tracking far closer to last year than it was through the spring. Net effective rent kept firming. NER was $1,781, up 0.1% week over week, with annual NER growth for new leases improving to -1.2% from -1.5% the prior week, the second consecutive week the annual gap has narrowed. Rents remain the primary drag on year-over-year performance, though the direction has been consistent. That national average understates how differently individual markets are performing. Of the 28 tracked markets reporting net effective rent this week, 9 posted positive annual rent growth and 19 were negative, spanning 16.5 points from San Francisco at +9.6% to San Antonio at -6.9%. Eight of those markets carried occupancy above last year while rents fell: Austin, Denver, Miami, Phoenix, Portland, Riverside, Sacramento and Tucson. That combination, demand holding while pricing gives way, is the pattern consistent with new supply being absorbed rather than demand weakening. Revenue performance continued to improve. RevPAU was $1,684, flat week over week, with the annual comparison improving to -1.3% from -1.6%. The revenue gap is closing on pricing rather than occupancy, with the annual improvement in NER accounting for nearly all of the move. Bottom Line: Rents are now doing the work that occupancy and demand did through late summer, narrowing the annual gap for a second consecutive week while leasing eases along the normal seasonal curve. The national picture is close to balanced, though that average hides a 16.5-point spread between the strongest and weakest markets. The question heading into the fall is whether rent momentum holds once the seasonal demand tailwind is fully behind the market. Explore our webpage for more insights and resources: https://bit.ly/Radix_Website
