January Results Point to Strong Outlook for Apartment Market in 2012 According to Axiometrics
(DALLAS, TEXAS - February 29, 2012) -
Axiometrics Inc., a provider of data and advisory services on the apartment market, reports that after effective rent growth slowed in the last few months of 2011, the market rebounded in January 2012, with a national growth rate that puts the market on course for 5.5% growth overall in 2012. This forecast is based on continued strengthening during 2012 in C-class properties, which have lagged behind A and B-class units the past few years.
“If job growth continues on its recent pace, effective rent growth in 2012 could be even stronger than our original forecast of 5.5%,” said Jay Denton, vice president of research for Axiometrics Inc. “In particular, we believe that Class C properties, which have weighed down the market numbers the past two years, will boost the overall market average in 2012 as residents continue to shuffle from Class B to C to control their housing costs, and as job growth improves in the sectors that benefit C class complexes, such as construction and manufacturing.”
Nationally, effective rents increased by 0.24% from December to January, which was in line with the rate for 2010 and 2011. While the immediate increase is not out of the ordinary, it does point to potentially stronger growth ahead for the second half of the year, especially compared to July and August of 2011, when the apartment market lost momentum during the U.S. debt crisis. Axiometrics expects annual effective rent growth to remain in the 4.1% to 4.2% range until July, at which point growth is forecasted to reach 5.5% by the end of the year.
Nationally, C-class properties gained momentum in annual rent growth during 2011, and this trend should continue throughout 2012.
The national occupancy rate declined 13 basis points (bp), from 93.5% in December to 93.37% in January. Over the last five months the overall decline in occupancy is 78 bps, primarily due to seasonality.
During the economic downturn, the gap in occupancy between B and C-class properties widened. The gap did not begin to narrow until February 2011, at which point it had grown from a five-year average of 205 basis points to 388 basis points. The current gap between Class B and C is 343 basis points nationally, though the numbers vary greatly in different markets. “In order for Class C to continue closing this gap, more residents will need to trade down from B to C properties, and job growth in sectors supporting Class C will need to accelerate,” added Denton.
Currently, Class A properties in 45 of the top 88 markets have an occupancy rate above 95.0%; Class B properties average 94.0% or better in 51 top markets. In the strongest markets, such as San Francisco, there has already been “filling in” for C-class properties, thus no occupancy gap. Denver and Dallas are two markets where it took longer for C-class properties to make a move relative to the B-class, but during 2011 the gap narrowed considerably. Atlanta, Memphis, and Houston are markets where C-class properties have yet to close the occupancy gap.
Axiometrics Inc. measures the performance of the apartment sector every month by surveying more than 18,000 properties and 4.8 million units. Learn more at www.axiometrics.com or by calling 214-953-2242.