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Thursday, 09 February 2017

Apartment Rents Seen Growing by 3.9 Percent This Year

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Commercial Real Estate Direct Staff Report

Apartment rents are expected to grow by 3.9 percent this year, according to Yardi Matrix. While that would represent a slowdown from the 4.1 percent growth registered last year, it remains well above the long-term annual average of 2.3 percent.

But rent growth will not be uniform across all markets. Some, like Dallas, Houston, Seattle, Denver, San Antonio, Orlando, Austin, Charlotte and Washington, D.C., might be challenged because either supply will outpace demand or rents have become out of reach for many residents.

Other markets, however, will outperform. Among them is Sacramento, which is expected to see rent growth of 9.6 percent this year. That would be on top of the 10.1 percent growth last year. The area enjoys a relative lack of construction as only 1,060 units are expected to come online this year. That represents less than 1 percent of the area's existing stock.

Overall, Yardi Matrix expects demand for units to remain strong through 2024 as the millennial cohort, that is, people between the age of 20 and 34, increases in size by 2 million to nearly 70 million, or 20 percent of the country's projected 344.8 million population. Millennials prefer urban apartment living because of the amenities that generally are available and their ability to live near where they work.

Meanwhile, renter households have increased by 9.3 million during the 10 years between 2005 and 2015, according to the Census Bureau, while owner-occupied households decreased by 2.1 million.

Yardi Matrix expects that 319,458 units will be added to the national inventory of apartments this year, a 5.3 percent increase from the number of units added last year. That would increase the overall apartment universe by 2.5 percent to 12.8 million units.

Among the cities with the biggest increases in inventory are Dallas, which is projected to get another 25,093 units this year, which would increase its apartment universe by 3.7 percent. Houston will see 15,450 units, for an increase of 2.6 percent, and Washington will see 13,686 units, or 2.7 percent.

But in terms of absolute growth, Nashville, Tenn., leads the pack with a projected 5.7 percent growth in its inventory, followed by Seattle and Miami, both with a 5.5 percent increase.

Capital will remain plentiful for apartments, despite the growth in supply and the uncertainty surrounding interest rates that should slow transaction volume. If rates climb substantially, Yardi Matrix warned that the 5.6 percent average yield that investors demand from their apartment investments likely will climb.

Nonetheless, apartments continue to be viewed as a relatively safe haven, when compared with other property types. That's evident by their escalating prices, which are now 52.1 percent higher than they were before the recession, according to the Moody's/RCA Commercial Property Price Indices. In contrast, the broader CPPI index is now 23.75 percent greater than it was before the recession.

Comments? E-mail Jen Loukedis or call her at (267) 247-0112, Ext. 212.



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Additional Info

  • Syndicate to Realpoint: No
  • Sector: Multifamily
  • Subject: Research (RES)
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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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