U.S. multifamily rents continue climbing this year with the September increase of $5 marking a new record of $1,167, according to the September edition of Matrix Monthly, a report on apartment market trends from Yardi Matrix released today.
September’s year-over-year increase of 6.8 percent was 30 basis points higher than the previous two months and the highest growth in the post-recession cycle.
In August, average nationwide rents rose $7 to $1,162, an increase of 6.5 percent year over year, according to Yardi Matrix data. That was the same percentage increase for July, when the average U.S. apartment rent rose to $1,155.
Rents have risen every month in 2015 and Paul Fiorilla, associate director of research at Yardi, told Commercial Property Executive he expects the upward trend to continue.
“We’ve had this consistency to the rate increase, which demonstrates the demand is not slowing down,” he said. “The traditional drivers of demand are not going away, so there is no reason to think that this is not going to continue for the next year or so.”
Fiorilla cited strong job growth and in-migration in the top markets as the key drivers in the “rent engine.” Citing data from the Bureau of Labor Statistics, the September report notes that about 60 percent of Yardi’s Top 30 metros have added 3 percent or more to their employment base in the 12 months ending in July.
On the demographic side, he said more multifamily households are being created as Millennials move into apartments and a growing number of Baby Boomers start downsizing and renting rather than owning homes.
Metropolitan areas in the West and Pacific Northwest led the way in September with rents in Portland, Ore., rising 16.3 percent year over year, according to the data collected by the Yardi Matrix business unit. The next top four metro regions, all above 8 percent year over year, were San Francisco, Denver, Sacramento, Calif., and Seattle.
The Southeast region, led by Atlanta, Orlando, Tampa and Miami in Florida, is also showing consistent rent growth, according to the Matrix Monthly report. Those metros were all above the national average of 6.8 percent year over year, according to the Matrix Monthly data. The report also noted that rents in Atlanta, Orlando and Miami all grew by 0.7 percent during a trailing three-month year-over-year period, with Tampa growing at 0.6 percent in the same time frame.
“Southeast metros continue to see above-trend employment growth, led by corporate relocations, increasing back-office staff and robust tourism, with growing populations drawn by the availability of jobs and inexpensive housing,” the report stated.
Areas that are not seeing the same pace of rent growth includes the Midwest and the Northeast with Richmond, Va., and Washington, D.C., falling below the long-term average. Houston, grappling with the effects of lower crude oil prices, has seen its year-over-year rent growth fall “to a relatively mediocre 4.9 percent and T-3 growth over the last three months has been almost flat, at 0.1 percent,” according to Matrix Monthly for September.
Matrix Monthly highlights the results of a monthly survey of apartment owners in 108 markets covered by Yardi Matrix. It is used as a business development tool for brokers, sponsors, banks and equity sources that underwrite multifamily investment transactions.