Apartment Fundamentals Mostly Flashing Green for C&W

Cushman & Wakefield continues to remain optimistic about the prospects for growth and better operating fundamentals this year in its apartment portfolio as it sees resilient rental demand, strong potential NOI growth in renewals, positive overall trade-outs, and limited concessions.

One of the largest third-party property managers nationally, with over 178,000 multifamily units, the firm said healthy apartment demand is stemming from a dislocated single-family market “as renters were substantially less likely to leave a rental to buy a home, especially with higher prices and financing costs.”

Cushman & Wakefield said it is finding renewals to offer “the greatest upside to net operating income (NOI)” after loss-to-lease built up in the years following 2021, as in-place rents continued to lose ground to new leases.

New lease trade outs stumbled a bit at the end of 2023; however, December’s data point was encouraging with new leases being signed at rates similar to those expiring over the final months of the year, ahead of RealPage’s benchmark. It said spring and summer leasing season typically brings positive numbers.

This year, it forecasts approximately 400,000 new units coming to market, “which will continue to strengthen the market in favor of renters,” according to the report.

Its portfolio is not nearly as inclined to offer concessions compared to national figures, which have seen limited rent growth, lately.

“We continue to see positive overall trade-outs and concessions across all classes dipped to their lowest levels in December,” it said.

On average, its concessions were less than one week for the average property in its portfolio.

Thus far, the labor market has been incredibly resilient in the face of the fastest rate-hike cycle in 40 years. With some caution lights flashing about the journey ahead,

As for caution, Cushman & Wakefield said its team is watching for any signs of weakness in its renters’ ability to meet obligations.

“Thus far, the lights are still signaling ‘green,’ and the share of move-outs for cost reasons remains low,” according to the report.

“While the market may not be as robust as it was in 2021 and the first half of 2022, operating fundamentals across the Cushman & Wakefield Asset Services portfolio remain relatively healthy.”