Just got an email from Jay Denton, Research VP at AXIOMetrics saying the national apartment building occupancy is 94.3%, a level not seen since 2006. Class A occupancy is at 95.5%, class B is 94.8% and class C is 92%. Also many submarkets around the country will see the first new supply of units this summer. Even so properties in Lease Up are doing well, averaging more than 20 move-ins a month. Further strength in the market is reflected by the fact that concessions are down to only 2-3 weeks in many markets.
Jay also shared an interesting idea for a leading indicator of market trends for apartment building investment:
Want an Early Indicator of Which Direction the Market is Heading? Watch the REITs.
Many of our clients follow the performance of the apartment REITs because they provide a more competitive benchmark for their portfolios than does the national average. The REIT data set also provides an early indicator for when the market is about to hit its peak for the year. The first chart in the newsletter shows that the REITs are more aggressive through the first five months of each year than the national average, and that includes being more aggressive at lowering rents for new leases during the downturn. What does the trend look like over a longer period of time?
The following chart shows that the REITs expand more quickly than the general market during the first half of the year, but then they lower rents to become more competitive during the months when traffic is slower. In other words, they outperform and underperform on rent growth at the right times.
The REIT trend starts to flatten about a month ahead of the national average. Going back to 2008, the chart would show REITs started to lower rents ahead of the rest of the country. This allowed them to fill up on occupancy as much as possible before the market really began to crash.
We’ll be watching the REIT trend this summer as a key indicator for whether or not the market is starting to slump as a result of the tepid job growth currently being reported.
There’s more charts and stats including top 10 and bottom 10 market breakouts over on AXIOMetrics National Monthly Trends report