SANTA BARBARA, CA—Continuing a trend of deceleration seen in multifamily over the past several months, US monthly rents were flat in September, remaining at $1,354, according to Yardi Matrix's monthly survey of 121 markets. Rents were up 2.2% year-over-year nationwide in September, representing a 10-basis-point decline from August and the slowest pace of annual growth since April 2011.
Year to date through Sept. 30, rents have grown 2.6%. Although the pace of growth represents “a solid increase,” it falls short of the sector's “stellar performance” in recent years, according to the Yardi Matrix report.
In comparison, rents rose 3.4% through the first three quarters in 2016, 4.9% in 2015, 4.0% in 2014 and 3.1% in 2013. “Rent growth tends to slow down in the fourth quarter, when fewer people move, so if things hold to form, gains for the year could be already baked in,” the report states.
On a trailing 12-month basis, rents increased 2.8% in September, down 20 basis points from August. Among metro areas, Sacramento continued its run at the top of the rankings with T-12 rent growth of 9.3%. On an asset-class basis, Renter By Necessity T-12 rent growth of 4.0% outpaced Lifestyle at 1.6%, continuing a trend of widensing spread between affordable and high-end rents.
Although an influx of new product in many markets is being tied to slower rent growth, Yardi Matrix points out that the pace of new supply is only one of several factors affecting the direction of apartment rents. The performance of the economy is another influence, and more recently there has been the impact of major hurricanes on some metro areas.
Yardi Matrix notes that the economy continues adding 150,000 to 200,000 jobs per month, representing a positive for demand. One sector where jobs aren't necessarily being added, on account of a lack of qualified candidates, is construction, and Yardi Matrix says this is affecting the pace of new apartment deliveries, despite a cycle-high 480,000 units under construction.
The report cites a recent survey from the National Federation of Independent Businesses, a small-business trade group in Washington, DC, which found that one-third of construction firms reported that labor quality was their biggest problem. About 88% of all survey respondents said they found it hard to fill some jobs.
The construction labor shortage is expected to worsen in some areas as workers migrate to Houston and Florida in connection with efforts to rebuild after Hurricanes Harvey and Irma. “Upwards of 50,000 multifamily units suffered damage in Houston, where the multifamily market should get a boost as displaced households find a temporary spot to relocate,” according to the Yardi Matrix report.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
