Effective rent growth is significantly higher so far this year than it was at this time in 2010, and at this pace rents may rise more in 2011 than they have since 2005.
Though the rate of rent growth slowed in August, it is still at a 5.17 percent annualized rate compared to a 4.72 percent at this time last year Assuming effective rent grows at the same rate in the next four months as it did in 2010, the full-year total would fall just below the historic highs of 2000 (6.18 percent) and 2005 (5.81 percent), according to a report from Axiometrics Inc., a provider of data and analysis on the apartment market.
“Even with the slight slowdown in August, we are on course in 2011 to produce the third highest rate of annual effective rent growth since we have been tracking the market,” said Ron Johnsey, president of Axiometrics Inc. “Occupancy-with 35 of the top 88 markets having occupancy rates above 95%-showed surprising growth and might have been the biggest story this month.”
The national occupancy rate moved up to 94.09 percent, with some markets approaching an overall “ceiling” for occupancy. The national occupancy rate increased from 93.92 percent in July to 94.09 percent in August. This was the third highest monthly growth rate of the year, resulting in occupancy nearly a full point higher thn it was at the beginning of the year.
Effective rents have increased 9.96 percent overall since hitting a trough in December of 2009, however, there are significant differences by property class. Over the past 20 months, effective rents have increased 11.54 percent for Class A properties, 10.44 percent for Class B properties, but only 6.74 percent for Class C properties. Atlanta, Dallas, Houston, Miami, and Oakland have shown the greatest discrepancy in rent growth between Class A and Class C properties since December of 2009. On the flip side, Class A properties have underperformed Class B and C properties in Bethesda, Durham, Minneapolis, San Diego, and Santa Ana.
Eight of the top 13 markets for annual effective rent growth are in Northern California, Texas, and Colorado. San Jose, Denver, and Boulder have posted more than 6.00 percent annual rent growth for each of the past two years. Savannah, Seattle, and Dallas, which were bottom dwellers in terms of annual rent growth a year ago, now also find themselves among the top growth markets.