Growth Powers Through; Occupancies Decline
Attesting to the resilience of demand for multifamily units, national asking rent growth clocked in at 4.6% for all of 2015, while effective rent growth mustered an impressive 4.7%. These figures are stronger than annual rent growth in 2007— the last peak period for rent increases for the sector — and are exceeded only by annual rent growth figures from the 1999-2000 period, when vacancies were even lower than they are today.
Herein lies the conundrum for apartment properties at this juncture: rent growth is undeniably (for some, surprisingly) strong, despite the concern of pessimists about how average rents are outstripping wage growth in many markets. However, vacancies have begun to increase from recent lows.
The national apartment sector vacancy rate for the end of 2015 stood at 4.4%, an increase of 10 basis points over the prior quarter. How should we read the tea leaves for multifamily moving forward?