Apartment rent growth diminishes in Q2

The apartment market witnessed a lack of growth during the second quarter.

While rental rates have climbed throughout much of the nation in recent months, the volume of new rental agreements has slowed, according to a report from MPF Research.

Effective rents for apartments rose 1.2 percent during the second quarter, which was significantly less than the 4 percent over the past year. The rate of annual rent growth also lost steam, as it previously was close to 5 percent at the end of 2011, according to the report.

"While rent growth remains well above the long-term norm, there's no question that pricing momentum now isn't quite where it was a few months ago," said Greg Willett, vice president of MPF Research. "For many owners and operators, the soft patch seen in job production has raised concerns that apartment demand could prove sluggish during the last half of the year."

The average occupancy for apartments was at 95.2 percent during the second quarter, which was an improvement from 94.9 percent in the previous quarter, and 94.4 percent during the same point in 2011, the report explained. When the apartment market hit its bottom in 2009, the figure stood at 92 percent.

"[I]nitial leasing will begin during the next few months on quite a few new properties that are on the way," Willett noted." Thus, the typical operational strategy calls for filling product now, even if it means holding back a bit on the rent increases that were targeted earlier."

Total apartment demand was at approximately 51,400 for the top-100 metropolitan statistical areas, the report said. However, completions of new properties during the quarter accounted for only 19,000 units. Over the past year, more than 169,000 units were in demand, and deliveries eclipsed 68,100 units.

Property management companies in San Francisco and San Jose have witnessed the best rent growth in the country, MPF explained. In the past 12 months, San Francisco had a 12.6 percent effective rent rate growth, while San Jose had 10.3 percent rate. Charlotte had the third-largest gain, as the city was at nearly 7 percent during that period. Boston, New York, Austin and Oakland all had improvements of 6 percent or more. Hartford, Denver-Boulder and Raleigh-Durham also posted strong gains of 5 percent or more.

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