By Mary Salmonsen (MultiFamilyExecutive.com Article) — The apartment vacancy rate stood unchanged in the first quarter of 2019 at 4.8%, up from 4.7% at the start of 2018 and 4.3% at the start of 2017, according to the Reis 1Q2019 Apartment Sector Preliminary Trends Release.
Both the national average asking and effective rents rose by 0.5% in the first quarter, down from 0.9% growth in the fourth quarter of 2018. The average asking rent has risen by 4.4% since the first quarter of 2018, and the average effective rent by 4.2%.
Net absorption was 37,159 units in the last quarter, lower than the previous quarter’s 49,558 units absorbed. While Reis senior economist Barbara Byrne Denham notes that the first quarter tends to have the lowest net absorption activity, this year’s was weaker than most, down by over 10,000 units from Q1 2018.
New construction totaled 33,276 units during this time, down from 61,097 in the fourth quarter of 201 and 56,018 in the first quarter of 2018. Denham anticipates greater new construction supply this year than last year, when 254,000 new units came online.
Only 15 metros saw a vacancy rate increase last quarter, down from 40 in Q4 2018. Charleston, S.C., Columbia, S.C., Orlando, Fla., Denver and Austin experienced the highest vacancy rate increases. Denham attributes this trend to high construction that exceeds net absorption. Metros with the biggest decline in vacancy include Palm Beach, Fla. and Tulsa, Okla.
Only eight metros experienced an effective rent increase above 1.0% in the first quarter, led by Chicago, Colorado Springs, Tuscon, Ariz., Louisville, Ky. And Milwaukee, Wis. Eight posted an effective rent decline, including Nashville, Portland, and Norfolk, Va. Denham notes that Nashville and Portland have seen strong rent growth and high construction over the past two years.
Denham and Reis expect new apartment construction to remain strong in 2019, then decelerate in 2020. Occupancy is expected to follow job and supply growth. Falling mortgage rates and the apparent strengthening of the for-sale housing market could impact some apartment markets. However, as condo and co-op sales are consistent with apartment occupancy activity, Reis anticipates that much of the impact of the housing market’s tailwind was concentrated in less urban areas.