Apartment Occupancies Down In Q1 Amid Falling Rents
Rising apartment rents and incoming supply have pushed down national multifamily occupancies in Q1 from 95.1% in the fall to 94.5% this year.
Experts said new supply will average 102,000 units quarterly over the rest of 2017, outpacing the 82,000 average seen at the end of 2016 and early 2017, Construction Dive reports. RealPage and Axiometrics said the current leasing slowdown should subside as winter ends, and predicted new household formation will rise in the wake of job market gains and strengthening economic growth.
The massive wave of supply scheduled to come online later this year falls within a handful of markets and is all within the middle to upper end of the spectrum. Developers have taken to building larger apartments and largely ignored smaller apartment buildings. While smaller apartment buildings could offer tenants a reprieve from high rents, experts said most developers stay away from them due to the regulatory costs of multifamily construction and the lower profits smaller developments produce.
Despite the drop experts said multifamily fundamentals remain strong; the market is still strong and rent changes vary widely from market to market. In markets where rent is falling and landlords are trying to find new ways to attract tenants, like New York City and San Francisco, luxury developments are offering co-working space as the new amenity to cater to colliding work/life habits.