Luxury Apartments Weathered a Supply Boom in These Six Markets
Austin had the most slippage among six key markets.
The supply boom in six key apartment markets has caught up with rent growth and there, especially in B-and C-class communities, 2023 was a year of rent cuts.
Making out the best in this negative environment were the Class A properties, according to a recent report from Julia Bunch at RealPage.
Those luxury units reported the least severe rent cuts compared to Class B and C units within the same market, the report said.
The six-market collection comprised Austin, Phoenix, Dallas, Orlando, Salt Lake City, and San Antonio.
As such, all asset classes reported deepening rent cuts in every quarter of 2023 – with one exception. From Q3 to Q4 2023, Class A rent cuts maintained the same rate of annual rent cuts at 4.4%.
That Q4 reading in Class A product was the mildest rent cut seen across the price spectrum. Operators in Class B (-5.7%) and Class C (-7.9%) units cut rents more severely in Austin in 2023. Austin performed worst among the A properties with an annual decline of 6%. Phoenix cut rents by 4.3%, (1.9% in A), and Orlando’s fell by 4% (2.9% in A)
Dallas’ Class A rents were cut by just 0.4% in 2023 and Salt Lake City’s were down 1.9%. San Antonio Class A units reported the least severe rent decline in 2023 at 1.7%.
More development is on the way, with these markets easily outpacing the national average for annual inventory growth of 2.3% in 2023 and the number of new units for 2024 will be higher with all six of these markets growing their total apartment inventory by at least 6%.
Austin tops that list – and the nation as a whole with a forecast of 11% growth this year.