Look up into any window of the closest apartment building and odds are you’ll see someone living there. National apartment occupancy in May soared to the highest level in at least six years, according to Axiometrics, an apartment data and research company. Ninety-five percent of all units are filled, even as thousands of new units are becoming available.
“It’s a pleasant surprise because it’s coming at a time when new supply is flooding the market,” said Stephanie McCleskey, Axiometrics’ director of research. “One reason occupancy is rising is that, not only are people moving into these new units, but they’re also moving into Class B units at a lower price point.”
It is especially a surprise to investors, who pulled out of multifamily real estate investment trusts (REITs) last year, as all eyes focused on surging home sales. The S&P index of residential REITs is now up nearly 14 percent from a year ago and up nearly 20 percent year-to-date. Some of the top performers in the sector: Preferred Apartment Communities, Essex and AvalonBay. Weakening affordability in the homebuying market is clearly favoring rentals.
“The rent-buy math remains generally favorable for our Apartment coverage universe,” wrote researchers at Deutsche Bank in a recent report. “Though pending supply remains a concern for certain apartment markets in 2014 and 2015, recent revenue growth trends were better-than-expected suggesting that strong demand, buoyed by improving rent-buy dynamics, is helping to offset increases in supply.”
About 180,000 new apartment units have become available throughout the U.S. in the past 12 months, according to Axiometrics. Still, growth in rental prices in May was the strongest it’s been in 16 months, at 3.5 percent.
Senior Director, Coldwell Banker New Homes Division
With over 200 condominium, townhome and loft projects successfully marketed
“Fewer properties for sale with such remarkably low interest rates make it a great time to sell but a more difficult time to buy”