Southeast Region Multifamily Market Sees Strong Rent Growth in Q2 2018

Image via Arbor Chatter

This post originally appeared on Arbor Chatter.


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The Southeast Region of the U.S. has continued to see strong rent growth, with nine of the 12 primary markets experiencing rent increases higher than the national average over the 12 months ending in Q2 2018. Vacancy rates across the region have skewed higher recently, driven by the addition of new supply in the markets.


Rent Growth

According to data from Reis, nine of the 12 primary markets in the region posted rental gains higher than the U.S. average of 4.5% over the 12 months ending in Q2 2018. The market with the highest rent growth was Orlando (up 6.9%), where the average asking rent rose to $1,185/unit at the end of the second quarter, up from $1,108/unit one year ago. Orlando is expected to continue to be a strong performer over the long-term, driven by strong demographics behind robust positive net migration and a young working-age population.

Nashville finished with the second highest rent growth in the region, rising 6.5% over the last 12 months (finishing at $1,114/unit, up from $1,046/unit), propelled by a surplus of new Class A product added to the inventory.

Vacancy Rates

Reis data showed that multifamily vacancy in the Southeast Region has skewed higher recently, with nine of the 12 primary markets posting higher vacancy rates than the U.S. average.

The three markets that managed to post vacancy rates lower than the U.S. average of 4.8% at the end of Q2 2018 were: Orlando (rising to 4.7% from 4.3% one year ago), Tampa-St. Petersburg (unchanged at 4.7%), and Jacksonville (improving to 4.4% from 4.7%).

The highest vacancy rates in the Southeast at the mid-year mark were reported in Birmingham and Nashville, both at 7.1%. Vacancy in both markets has been driven by the addition of new supply. Reis data revealed that more than 1,100 new multifamily units were delivered in Birmingham during 2017, representing 2.5% of total inventory and the highest annual total since 2006. In Nashville, nearly 6,600 units were delivered last year, which represented 5.8% of the existing inventory and was the highest annual total on record for the market.

The highest level of multifamily development in the Southeast Region during 2017 was in Atlanta, with a total of 9,000 new units completed. Atlanta finished fourth nationally for the year, behind only the Houston, Dallas, and New York City markets. Reis forecasts more than 27,200 additional units to come online in Atlanta through 2022, the third-highest forecasted total nationally for that time, behind only Dallas and Los Angeles.


Employment 

According to the U.S. Bureau of Labor Statistics, employment in the South region (combined South Atlantic and East South Central areas) increased 1.6% during the 12 months ending in July 2018, lower than the 2.4% growth rate for the 12 months ending in July 2017, yet in line with the U.S. overall growth rate.

The Orlando-Kissimmee-Sanford, FL metropolitan area had the highest employment growth rate in the region over the last 12 months (3.6%), followed by Raleigh, NC (3.2%) and Jacksonville, FL (3.1%).

The unemployment rate for the South finished at 3.9%, down from 4.2% one year ago, while the labor force participation rate increased 1.3%.

Dallas Multifamily Market Remains Strong Through Q1 2018

Image via Alex Chatter

After standing out as one of the stronger performing markets in the country during 2017, Dallas continued its momentum during the first quarter of 2018. Rent growth and investment activity remained strong, while vacancy rates held at historically low levels despite a high volume of new supply added to the market.

Read the full report on Arbor Chatter here: Dallas Multifamily Market Remains Strong Through Q1 2018

L.A. Multifamily Fundamentals Remain Strong, Sales Volume Up Slightly in Q1 2018

Image via Alex Chatter

At year-end 2017, we took a look at the Los Angeles multifamily market. We noted then that Los Angeles stood as one of the stronger markets nationally, with low vacancy and high investment volume. As we look at results from the first quarter of 2018, market fundamentals remain strong, although signs of weakness continue to be observed.

Read the full report on Arbor Chatter here: L.A. Multifamily Fundamentals Remain Strong, Sales Volume Up Slightly in Q1 2018

Los Angeles Multifamily Rents Hit New Highs for 2017, Class B/C Vacancies Decrease

Los Angeles remained one of the more sought-after multifamily markets in the U.S. during 2017, as rent growth and investment volume ranked near the top nationally. The vacancy rate also remained low, despite an influx of new supply, and demand for additional housing remains high. The local economy has recovered from the recession, although high housing costs and restricted in-migration may slow expansion.

Read the full report on Arbor Chatter here: Los Angeles Multifamily Rents Hit New Highs for 2017, Class B/C Vacancies Decrease

Dallas Multifamily Posts Strong 2017, Eyes on Supply & Demand Balance for 2018

The Dallas multifamily market posted strong results in 2017 as rent growth continued and investment activity was high. Vacancy — driven by an influx of new supply — increased,  though levels remained well below previous highs.

Read the full report on Arbor Chatter here: Dallas Multifamily Posts Strong 2017, Eyes on Supply & Demand Balance for 2018

U.S. Multifamily Year in Review 2017 – Still Going Strong

This article was originally published on Arbor Chatter: U.S. Multifamily Year in Review 2017 – Still Going Strong and all charts and images are from Arbor Chatter.

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The U.S. multifamily market continued to post strong results during 2017. Rent growth slowed, although remained healthy, and appears to have peaked in 2015. Despite a high volume of new supply, vacancy increased only slightly and remained at historically low rates. Investment activity was slow to start the year, yet gained momentum as the year went on, and finished just below 2016’s record highs.

Rental Market

The fourth quarter marked the 32nd consecutive quarter with positive rent growth for U.S. multifamily properties, according to data from Reis. Rent increased 4.2% during 2017, up from 4.0% during 2016, although was below the peak of 5.9% posted in 2015.

The vacancy rate increased to 4.5%, up from 4.2% one year ago, yet remained well below the previous high of 8.0% in 2009. The active development pipeline suggests 2016 may have been the cyclical low for vacancy.

Rent growth in Class A properties increased 4.3% year-over-year, as compared with 3.2% for Class B/C properties. Additionally, vacancy in Class A properties increased to 5.8% from 5.5% at the end of 2016, while Class B/C vacancy rose to 3.4% from 3.1%.

Birmingham had the most substantial rent growth among primary markets for the year, increasing 7.3%. Gains in the financial services and construction industries have driven the local economy.

New Development

Data from Reis showed that 2017 was a record year for multifamily supply growth in the U.S., as more than 221,100 new units came online, surpassing the 2016 total of 219,800 units. Demand struggled to keep pace with the additional supply, as absorption totaled 167,700 units, down from 213,900 units in 2016.

Many projects initially expected to finish during 2017 were delayed into 2018, suggesting an even stronger year ahead. Reis forecasts that a total of 265,100 new units will be added to the market in 2018, with absorption predicted to reach 202,500 units.

A total of 199,600 Class A multifamily units were delivered during 2017, building on last year’s total of 207,100 units. In the last eight years, less than 28,000 Class B/C multifamily properties have been added to the market.

Sales Market

Following a slow start to the year, multifamily investment activity increased as the year progressed. Data from Real Capital Analytics (RCA) showed that 2017 volume reached $150.1 billion, just below the historical high of $161.2 billion recorded during 2016, marking the first year since 2009 with a decline in volume.

The average sales price was up 1.0% on the year and up 19% compared to the five-year average. Cap rates continued to decline, falling 10 basis points during the year, to 5.6%.

The RCA CPPI™ apartment price index increased 10.6% during 2017, higher than the 10.1% increase for 2016. In comparison, the all property index increased 7.1% in 2017 and 8.6% in 2016.

Economic Overview

According to data from the U.S. Bureau of Labor Statistics (BLS) , total nonfarm payroll employment in the U.S. increased 1.5% during 2017, a gain of 2.2 million jobs, which was the lowest annual total since 2012. Employment trended up in construction, food services and drinking places, health care, and manufacturing. The unemployment rate was 4.1%, an improvement on the 4.7% rate reported one year ago.

The BLS also reported that over the last 12 months, the Consumer Price Index increased 2.1%. The shelter index rose 3.7%, down from 4.0% one year ago, with both the owners’ equivalent rent and the rent of primary residence indexes increasing 3.2%.

Real gross domestic product increased at an annual rate of 2.6% in the fourth quarter of 2017, according to the “advance” estimate released by the U.S. Bureau of Economic Analysis.

The U.S. Census Bureau reported that the homeownership rate finished 2017 at 64.2%, up slightly from 63.7% at the end of 2016. This marked the first annual increase since the peak of 69.2% in 2004, during one of the biggest housing booms in history.