A new national report from Yardi® Matrix portrays remarkable consistency in the U.S. multifamily industry. Rents increased by $5 in April 2019 as robust job creation continues to drive absorption of about 300,000 new units per year.
The average rent increase represents year-over-year and year-to-date growth of 3 percent and 0.8 percent, respectively. While these figures, based on a survey of 127 major U.S. real estate markets, represent lower growth than during that period in recent years, “market performance has been remarkably consistent over time and across geographic zones,” the report said. It added, “With the prime rent growth season just starting, it remains to be seen whether this year’s gains will be stellar or merely average, but in any event there seems to be no reason to think the multifamily juggernaut is going to hit the pause button.”
The average rent in April was $1,436. The year-over-year rent growth leaders in Yardi Matrix’s top 30 markets remained unchanged from last month: Las Vegas, Phoenix and Atlanta were the top three metros, while Sacramento, Calif., traded places with the Golden State’s Inland Empire for the fourth spot. Tech hub markets such as Raleigh and Charlotte, N.C., Austin, Texas, and Tampa, Fla., also showed strong growth.
Last year, the multifamily market saw dramatic growth, with a 15 percent jump in apartment transactions totaling nearly $168 billion, reported BBG, a commercial real estate due diligence firm. This year, an estimated 280,000 multifamily units will be completed, slightly down from 290,300 units in 2018, though it still reflects a healthy market.
One of the biggest factors fueling this demand is more young adults residing in multifamily properties. This has been attributed to various reasons, including high debt levels incurred among this age group, the desire to be mobile and flexible, the lack of affordable single-family home ownership options – particularly in metropolitan areas – and a preference to live in or close to urban cores.
While the vacancy rate for multifamily units ticked up slightly to 4.8 percent in the first quarter of 2019 from 4.7 percent at beginning of 2018, the report said, the rate was still significantly below 8 percent posted a decade ago.
Existing multifamily properties have increased in value as it is more expensive to build more product as a result of rising new construction costs, including labor, materials and equipment. Value add properties are in high demand where moderate to significant renovations can increase rents significantly.
New trends in multifamily living have emerged during this period of growth, such as vacant department stores being repurposed for apartment rentals and the proliferation of co-living buildings in major cities. New amenities and finishes are being added in all classes of properties, including added attention to pet amenities, common areas that encourage connectivity, and various parking features including electric charging stations, bicycle storage, motorcycle parking, and shared car services located on-site.
Mary Ann Barnett, MAI, BBG Multifamily Practice Leader and Managing Director, commented: “In 2018, multifamily housing had a banner year as a result of a robust economy, a continuing trend of a younger generation continuing to migrate to urban areas and increased investor demand for this asset class. We anticipate that multifamily will remain stable in 2019 as underlying market fundamentals continue to support this market.”