A. Lee Graham
The rent growth pace for apartments nationwide reached 4.7 percent during 2014, according to MPF Research, a market intelligence division of Carrollton-based RealPage Inc.
In the past two decades, similar growth during the final three months of the year occurred just once: in 2005.
“This market cycle for the apartment industry looks like a record-setter in terms of both total revenue growth and the duration of the strong increases,” said Greg Willett, vice president of MPF Research, commenting in a news release.
“The pace of rent growth normally slows after the first couple of years in a cycle, once additional new supply comes on stream, but demand is rising right along with deliveries this time,” Willett said.
About 246,579 apartments were completed in the nation’s 100 largest metros during 2014, marking a 14-year high. Ongoing apartment construction in the top 100 metro areas reached 405,886 units. Of those, 290,145 units are expected to complete during 2015, according to the report.
Underlying apartment demand influences suggest 2015’s product absorption capacity should roughly align with expected deliveries.
“The momentum in job creation that emerged during 2014 looks sustainable in 2015, pointing to significant new household formation and sizable apartment demand,” Willett said.
Rent growth of 3.5 percent to 4 percent appears likely in 2015, according to the research firm.
“While occupancy should continue to be tight, apartment owners and operators may have to be a little more conservative in their pricing strategies over the coming year in order to capture available demand,” Willett said.
On the metro level, the San Francisco Bay and Denver remained the country’s rent growth leaders during 2014. Effective rents for new leases rose 11.5 percent in Oakland, 10.5 percent in San Jose, 9.8 percent in San Francisco, and 9.7 percent in Denver-Boulder.
At the next tier of performance, annual effective rent growth registered at 6 to 7 percent in Atlanta (6.8 percent), Portland (6.7 percent), San Diego (6.7 percent), West Palm Beach (6.5 percent), Los Angeles (6.3 percent) and Seattle-Tacoma (6.1 percent).
The full fourth-quarter 2014 report is available at www.realpage.com/MPFQ4-2014-Report.
RealPage Inc. provides property-management software solutions for the multifamily, commercial, single-family and vacation rental housing industries. More information is available at www.realpage.com.