rental trends - Meyers Research

RENTAL TRENDS
DEC 2013
QUARTERLY MULTI-FAMILY REPORT
U.S. MARKET UPDATE
RENTAL TRENDS
™
Real Estate Market Insight for the Multi-Family Industry
DECEMBER
2
National
Market
Review
5
MultiFamily
Permit
Issuances
6
2013
RealFacts
Meyers
Research
Index
7
RealFacts
Meyers
Research MF
Investment
Index
9
RealFacts
Geographic
Footprint
10
About Us
11
Contact Us
RENTAL TRENDS
DEC 2013
NATIONAL MARKET REVIEW
Demographic and economic trends including a strengthening job picture, relatively flat
homeownership rates, and the changing composition of today’s households, all continue
to support strong rental market fundamentals. The average national rent for U.S. multifamily markets covered by RealFacts continued to rise in the third quarter of 2013,
averaging $1,092 per month. The third quarter level represents an increase of 1.6% from
All-Time High
Average Rent
second quarter levels and a 4.9% rise from a year ago. For the seventh consecutive
quarter, average monthly rents remained above $1,000. Rents are expected to continue
increasing for the nation as a whole, although at a more moderate pace compared to the
past few years.
Despite increasing rental rates, occupancy levels continue to inch upward, with shifting
demographics pointing towards steady demand for rentals in today’s market. The
average national occupancy rate increased slightly to 94.0% in the third quarter, up from
93.9% in the second quarter and 93.8% in the first quarter. Nevertheless, occupancy
1.6%
Increase from
Q2 2013
4.9%
Increase from
1 year ago
rates continue to remain well below levels seen in the late 1990s, although occupancy is
expected to continue to creep upwards in the short term.
Shifting demographics also point to a change in demand for apartment types. While all
unit types experienced growth in average rental rates during the third quarter, average
rents increased the most for studio units, rising almost 3% for the quarter. This compares
to an increase of 1.5% to 2.0% for other unit types, with the exception of three-bedroom,
two-bath units, which experienced the smallest rise in rents of about 1% for the quarter.
The discrepancy in rental rate growth demonstrates changing household compositions,
with the oldest of the echo boomers now reaching their late 20s and beginning to
create a significant number of new smaller households. Similarly, larger bedroom-count
apartments may decline in popularity, as family households who were unable to purchase
a home in the recent downturn move into homeownership.
Source: RealFacts
Average Rent
NATIONAL
AVERAGE
RENT
Rent
A MEYERS RESEARCH PUBLICATION
% Change
2
RENTAL TRENDS
DEC 2013
Source: RealFacts
Overall Occupancy
NATIONAL
OCCUPANCY
RATE
Occupancy Rate
NATIONAL
QUARTERLY
TRENDS
Average Rent
Source: RealFacts
Rents
A MEYERS RESEARCH PUBLICATION
Occupancy
3
RENTAL TRENDS
Class A
EXISTING
PROPERTIES
BY CLASS
UNITED
STATES
Source: RealFacts
DEC 2013
1,539
12%
Class B
2,410
18%
Class C
9,244
70%
AVERAGE
ASKING
RENT BY
BED/BATH
Source: RealFacts
A MEYERS RESEARCH PUBLICATION
$1,578
$1,350
$1,371
$1,247
$955
$950
$988
4
RENTAL TRENDS
DEC 2013
MULTI-FAMILY PERMIT ISSUANCES
Through August of 2013, a total of
the moderating pace of activity, multi-
Inland Empire, Sacramento, and Portland
216,848 multi-family permits were issued
family permit issuances should remain
are on pace to experience the largest
throughout the nation. At this pace,
below historical averages and well below
percentage increases in permit activity in
multi-family permit activity is expected to
the peak of over a million permits issued
2013 compared to the previous year, with
reach roughly 325,000 units by year end,
in 1972. On an annualized basis, permit
annualized permits anticipated to rise over
representing a 5% increase from 2012
activity is strongest in New York, Miami,
115% in these markets. Our forecast is
levels. This moderate increase in permit
and the Texas markets of Houston,
for steady growth over the next couple of
levels follows the more frenzied activity of
Austin, and Dallas, with all of these
years, with multi-family permits peaking at
the past two years, with explosive gains
markets anticipated to issue over 10,000
historical averages in 2015.
of 51% in 2012 and 36% in 2011. With
multi-family permits for the year. The
Permits (in thousands)
MULTI-FAMILY PERMIT ISSUANCES (1959 - 2019F)
Multi-Family
A MEYERS RESEARCH PUBLICATION
Source: U.S. Census and Meyers Research
5
RENTAL TRENDS
DEC 2013
REALFACTS MEYERS RESEARCH INDEX
The RealFacts Meyers Multi-Family Investment Index tracks 28 metro areas throughout the United States. Eleven indicators including
rental increases, occupancy, absorption, job growth, multi-family permit levels, and estimated cap rates for stabilized properties are compiled and measured against historical averages. The subsequent weighted investment index offers a benchmark of the apartment industry for each metro area from a standpoint of an investor looking at ground-up development. The nation overall ranked in the middle of the
middle tier, with a score of 5.5 on the scale, an increase from a 5.2 score in our second quarter analysis. All markets except Washington
DC witnessed an annual rental rate increase during the third quarter, with San Francisco and Oakland both experiencing a 10% rise while
DC declined 1%. Most markets experienced no change or a slight 1% increase in occupancy rates, although six of the areas analyzed
experienced a slight 1% decline from the previous year.
TOP TIER
MIDDLE TIER
SAN FRANCISCO
7.3
BOTTOM TIER
ORANGE COUNTY
6.0
DETROIT
4.8
4.8
SAN JOSE
7.1
NEW YORK/NEW JERSEY
6.0
CHICAGO
SEATTLE
7.0
MIAMI
6.0
JACKSONVILLE
AUSTIN
6.9
WASHINGTON D.C.
5.9
BOSTON
6.7
MINNEAPOLIS
5.8
PORTLAND
6.7
ATLANTA
5.8
HOUSTON
6.5
UNITED STATES
5.5
DALLAS
6.5
PHOENIX
5.3
OAKLAND
6.5
BALTIMORE
5.3
DENVER
6.4
INLAND EMPIRE
5.1
LOS ANGELES
6.2
CHARLOTTE
5.1
SAN DIEGO
6.1
TAMPA
5.1
SACRAMENTO
5.1
Demonstrating the fundamental strength of
the rental market, top tier areas accounted
for a significant number of markets
tracked. A total of 12 markets achieved
an investment index of over 6.0, with top
tier markets averaging a 6.7 index in the
third quarter, down slightly from 6.8 in the
second quarter. Rents in these markets
trended upward, with an average increase
of 7% from a year ago. Occupancy
rates remained steady at 95%, and high
investment interest kept CAP rate levels
generally around 4% to 5%. Boston and
Los Angeles moved into the top tier during
the third quarter from the middle tier in the
previous quarter. Of top tier markets, the
most significant ground-up growth (based
on multi-family permit level change) can
be found in Portland and Boston, as well
as in San Jose and San Diego. All of these
markets have annualized permit activity of
over 50% from a year ago. Boston’s strong
A MEYERS RESEARCH PUBLICATION
permit activity, rising 91% from a year ago,
as well as its robust job growth (62,600
new jobs), allowed the market to jump
nearly one whole point on the index from
5.8 in the second quarter to 6.7 in the third
quarter.
The middle tier of the index included 13
markets in addition to the nation overall,
with investment indexes ranging from 5.1
to 6.0. Average rents rose 3% from a year
ago, while occupancy levels remained at
94% on average, both consistent with
levels during the second quarter. CAP
rates in these markets are generally in the
5% to 6% range. Orange County, DC, and
New York moved down to this tier from
the top tier during the third quarter, with
DC’s decreased index primarily the result of
lower permit activity, while higher cap rates
dropped the Orange County index. The
LAS VEGAS
4.6
4.5
Inland Empire and Sacramento moved up
to the middle tier from the bottom tier, with
both indexes rising to 5.1 up from 4.6 in the
second quarter. Both markets benefited
from stronger permit activity and increased
occupancy rates during the third quarter.
Only four markets ranked in the bottom
tier of our index during the third quarter,
with indexes ranging from 4.5 to 4.8. In
the past two previous ranking, five markets
were listed in the bottom tier, indicating
the growth of investment opportunities in
most markets surveyed and in the nation
overall. In addition, the average index for
the bottom tier markets was 4.7 in the third
quarter, up from 4.5 during the second
quarter. Three of the four bottom tier
markets were also in the bottom tier last
quarter, with the exception of Detroit. A
lower occupancy rate and higher jobless
rate dropped Detroit’s index down from
5.3 in the second quarter to 4.8 in the
third quarter. Despite being bottom tier
markets, average rents rose 3% from a
year ago in these markets, while occupancy
levels averaged 94%, higher than the 93%
average of bottom tier markets last quarter.
As multi-family permit activity increases
and employment levels strengthen, the
investment indexes overall for the markets
should continue to rise.
6
RENTAL TRENDS
DEC 2013
REALFACTS MEYERS RESEARCH MF INVESTMENT INDEX
APARTMENT METRICS
3Q 2013
Rent
Annual %
Change
3Q 2012
Occupancy
Annual %
Change
% of
Class A
2013
Units
Absorbed
Rents vs.
Mortgage
Payment
San Francisco
$2,617
10%
95%
0%
11%
342
0.98x
4.25
-
4.75
San Jose
$2,140
8%
94%
-1%
12%
1,734
0.97x
4.25
-
5.00
Seattle
$1,252
8%
94%
0%
18%
2,800
1.11x
4.00
-
5.00
Austin
$1,009
6%
95%
0%
16%
420
1.33x
5.00
-
5.50
Boston
$2,178
4%
95%
0%
30%
46
1.81x
3.75
-
5.00
Portland
$1,021
7%
96%
0%
13%
233
1.15x
4.25
-
4.75
Houston
$879
5%
94%
1%
12%
6,832
1.49x
5.00
-
5.75
Dallas
$863
4%
94%
0%
9%
3,607
1.49x
4.75
-
6.00
Oakland
$1,787
10%
96%
-1%
10%
184
1.15x
4.00
-
5.50
Denver
$1,091
8%
94%
0%
16%
620
1.16x
6.50
-
7.50
Los Angeles
$1,829
4%
95%
-1%
20%
2,245
1.37x
3.75
-
4.50
San Diego
$1,522
5%
96%
0%
13%
1,398
1.02x
5.25
-
6.00
Orange County
$1,708
5%
95%
0%
15%
1,580
0.88x
5.00
-
5.50
New York/New Jersey
$2,617
4%
95%
0%
12%
-76
1.97x
4.50
-
6.00
Miami
$1,327
5%
95%
0%
9%
491
1.67x
5.00
-
6.00
Washington D.C.
$1,655
-1%
94%
-1%
10%
100
1.31x
4.75
-
5.25
Minneapolis
$1,150
3%
95%
-1%
0%
68
1.86x
5.00
-
5.75
$936
7%
94%
2%
16%
-427
2.25x
5.75
-
6.25
$1,092
5%
94%
0%
13%
28,900
1.71x
4.75
-
5.75
$777
3%
92%
0%
13%
1,776
1.27x
5.00
-
6.00
Baltimore
$1,359
1%
93%
-1%
4%
-41
1.66x
4.75
-
5.25
Inland Empire
$1,136
3%
95%
1%
20%
579
1.45x
5.00
-
5.50
Charlotte
$776
2%
94%
0%
2%
7
1.38x
4.75
-
5.50
Tampa
$887
2%
94%
1%
8%
263
1.73x
5.50
-
6.25
Sacramento
$996
3%
95%
1%
11%
-11
1.32x
6.25
-
6.75
Detroit
$929
6%
94%
0%
0%
8
3.40x
7.00
-
7.75
Chicago
$1,232
1%
95%
0%
9%
-121
2.14x
4.75
-
5.75
Jacksonville
$876
4%
94%
1%
21%
255
1.88x
6.00
-
6.75
Las Vegas
$755
2%
93%
1%
11%
219
1.35x
5.00
-
6.00
Metro Area
Atlanta
United States
Phoenix
2/
Class A
Est. Cap Rate 1/
Source: RealFacts; Census; NAHB, Bureau of Labor Statistics; Indeed.com
1/ Estimated cap rate from a survey of brokers (CBRE, Marcus & Millichap) for stabilized properties
2/ United States rental stats reflect data collected by RealFacts, which includes coverage of 96 MSAs in 14 states.
A MEYERS RESEARCH PUBLICATION
7
RENTAL TRENDS
DEC 2013
REALFACTS MEYERS RESEARCH MF INVESTMENT INDEX
SUPPLY
Annualized
MF
Permits
DEMAND
% Change
MF %
of Total
Permits
Job
Growth
Jobless
Rate
Job
Postings
Per Capita
% of
Renters
Investment
Index
5,084
39%
90%
40,200
5.4%
84
43.1%
7.3
San Francisco
5,718
71%
75%
29,600
6.8%
165
45.5%
7.1
San Jose
8,619
-1%
48%
38,500
6.1%
78
40.5%
7.0
Seattle
11,487
16%
55%
25,500
5.2%
90
40.9%
6.9
Austin
7,769
91%
61%
62,600
6.2%
98
33.4%
6.7
Boston
6,669
117%
53%
23,600
7.1%
67
38.4%
6.7
Portland
12,545
-6%
26%
81,900
6.1%
65
40.5%
6.5
Houston
13,514
-9%
38%
144,200
6.0%
63
40.3%
6.5
Dallas
1,211
-18%
45%
17,300
7.4%
81
43.1%
6.5
Oakland
8,498
30%
54%
40,900
6.5%
95
39.6%
6.4
Denver
9,716
23%
72%
54,500
10.2%
31
52.3%
6.2
Los Angeles
5,228
55%
67%
23,600
7.4%
55
46.1%
6.1
San Diego
Metro Area
4,568
42%
54%
35,900
6.2%
31
52.3%
6.0
Orange County
29,040
60%
76%
388,800
7.6%
44
48.8%
6.0
New York/New Jersey
13,956
104%
68%
81,700
7.3%
31
40.1%
6.0
Miami
8,438
-18%
37%
31,300
5.5%
105
34.4%
5.9
Washington D.C.
3,915
-18%
35%
66,300
4.7%
75
27.8%
5.8
Minneapolis
9,072
104%
37%
80,200
8.0%
65
37.6%
5.8
Atlanta
325,272
25%
35%
10,068,000
7.3%
7
30.0%
5.5
United States
4,589
69%
25%
21,000
7.4%
68
39.8%
5.3
Phoenix
2,460
27%
32%
34,100
7.1%
85
34.5%
5.3
Baltimore
3,197
147%
34%
10,300
10.4%
25
41.0%
5.1
Inland Empire
3,339
-34%
26%
32,200
8.3%
79
40.9%
5.1
Charlotte
4,898
12%
37%
43,400
7.0%
59
34.7%
5.1
Tampa
858
129%
18%
12,900
8.5%
49
40.4%
5.1
Sacramento
743
78%
12%
28,900
9.8%
50
28.9%
4.8
Detroit
3,434
-3%
33%
101,200
9.1%
52
31.9%
4.8
Chicago
902
-65%
12%
13,600
6.7%
62
28.6%
4.6
Jacksonville
1,974
70%
20%
24,600
9.6%
55
45.2%
4.5
Las Vegas
Source: RealFacts; Census; NAHB, Bureau of Labor Statistics; Indeed.com
1/ Estimated cap rate from a survey of brokers (CBRE, Marcus & Millichap) for stabilized properties
2/ United States rental stats reflect data collected by RealFacts, which includes coverage of 96 MSAs in 14 states.
A MEYERS RESEARCH PUBLICATION
8
RENTAL TRENDS
DEC 2013
REALFACTS GEOGRAPHIC FOOTPRINT
UPCOMING EVENTS
REALFACTS DATABASE FACTS
» Database of 13,193 Properties
» Over 8,000 Sales Transactions
» 2.8 Billion Square Feet of Apartments
» 95% of the Database
» 94 Consecutive Quarterly Updates
» 20-Year History for
of Rents & Occupancy
» 96 MSAs in 16 States
Resurveyed Each Quarter
Individual Complexes
» More Than 3,300,000 Units
» 24 Years of Experience 1989-2013
» 136 Individual Search Criteria
» 3,100 Changes Made Daily
Used Alone or Combined
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RENTAL TRENDS
DEC 2013
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