By Razvan Cimpean (MultiHousingNews.com Article) —
Countrywide, average rents rose 3.1 percent year-over-year through November, to $1,473, according to Yardi Matrix data. Meanwhile, the five metros on this list saw their overall rents inch down by as much as 4.6 percent. As new supply is coming online at an increased pace and deliveries are expected to surpass 100,000 units this quarter, rents declined nationally by $3 in November.
5. LAFAYETTE-LAKE CHARLES, LA.
Record-low oil prices heavily impacted the metro—400 jobs were lost in the 12 months ending in October when unemployment reached 4.6 percent, 130 basis points above the national average. As population growth started to lose steam in recent years, development activity decreased significantly following the completion of more than 1,200 units in 2016. In 2017, no new communities hit the market, while last year two projects totaling 427 apartments came online, a 65 percent drop from 2016. As a result of lagging demand, average rents started to decline in recent months, clocking in at $871 in November, down 0.1 percent year-over-year.
ITEX Group is developing a 288-unit community in Lake Charles, expected to come online by year-end and marking 2019’s sole completion. As the submarket’s average rental rates saw a bigger decrease compared to the metro, construction activity has been focused here. Over the past four years, more than 40 percent of the 1,948 units delivered were in Lake Charles.
4. SCRANTON-WILKES-BARRE, PA.
One of the nation’s markets with the greatest occupancy loss, Scranton-Wilkes-Barre saw its population decrease by 1.4 percent since the last Census, as of the July 2018 estimates. Impacted by demographic loss, the employment market contracted by 400 jobs in the 12 months ending in October. The unemployment rate increased by 60 basis points over the same period and reached 5.1 percent. While the manufacturing and leisure and hospitality industries continue to shrink, efforts to diversify the economy are slowly paying off. The professional and business services sector is expanding steadily, gaining 500 jobs for a 1.7 percent growth.
Demand for new supply was considerably low, with no major completions over the past three years. The overall rent, which stood at $1,077 in November, saw a 0.5 percent decrease year-over-year. Work is underway on a 60-unit community dubbed The Bank in the Wilkes-Barre submarket. Located within an Opportunity Zone, the property originally served as the Miner’s Bank Building, delivered in 1911. Once the adaptive reuse project is complete, it will be the submarket’s largest delivery in more than two decades.
3. BATON ROUGE, LA.
The effects of Louisiana’s 28-month recession are still visible on Baton Rouge’s economy. However, despite 5,000 jobs lost in the mining, logging and construction sector, the metro gained 2,400 positions in the 12 months ending in October. That was due to strong growth for the education and health services and the leisure and hospitality industries, which added a combined 4,900 jobs.
The metro’s unemployment rate was at 4.3 percent in October, up 10 basis points year-over-year. While Baton Rouge’s demographic gains were solid between 2010 and 2016, population growth started to stagnate afterward. As of last July, the metro’s population expanded by 3.6 percent since the 2010 Census. The average rent rate dropped by 0.7 percent year-over-year through November, to $1,000. Developers were working on four projects totaling 717 units in November, with deliveries projected to increase by almost 55 percent from last year, to 1,214 units. In the Highlands-Perkins submarket, LDG Development is building the 204-unit Meadows at Nicholson, slated for completion by year-end, while Scion Group is developing a 287-unit student housing project dubbed Ion, scheduled for delivery in 2020.
2. HONOLULU, HAWAII
Although the trade employment industry lost 3,000 positions in the 12 months ending in October, the metro added a total of 4,600 jobs, with the bulk in the leisure and hospitality and government sectors. Tourism, the metro’s economic powerhouse, has significantly driven up land and development prices—one of the reasons why construction has been rather limited recently. Developers completed only three projects totaling 403 units over the past three years, equal to 2 percent of the metro’s relatively low inventory. While average rents decreased 1.7 percent year-over-year through November, they were still some of the highest in the country, at $2,031. Rent loss was bigger for the Lifestyle category—down 2.6 percent, to $2,461—than for Renters-by-Necessity—down 0.7 percent, to $1,665.
Following a cycle high of $772 million in multifamily transactions, investment activity has plummeted in Honolulu this year. An individual investor paid $13 million for the 83-unit Alapai in downtown Honolulu, the metro’s sole significant transaction in 2019.
1. MIDLAND-ODESSA, TEXAS
After ranking among the country’s top markets for rent growth for the better part of the past two and a half years, Midland-Odessa has ended up at the opposite end of the spectrum. During the expansion period, the overall rent increased by more than 40 percent and now the metro is only facing a slight correction. Even so, the multifamily market continues to draw on the metro’s outstanding demographic gains. Demand for new supply remains strong, with four projects totaling roughly 1,000 units underway as of November. Additionally, three properties comprising 826 apartments are expected to deliver this year, a 250 percent surge from the previous year. In this context, a 4.6 percent decrease in average rents year-over-year through November doesn’t paint that grim a picture for the metro. Overall rents—at $1,424—were almost on par with the national average.
Strong demand also translated into a considerable increase for overall transaction volume, which more than doubled from last year to roughly $290 million—the highest level over the past four years. Advenir, one of Midland-Odessa’s top multifamily owners, expanded its portfolio with the acquisition of three properties totaling 980 units.