Washington, D.C.—The national apartment market experienced a slight uptick in annual effective rent growth during March 2014, increasing at a rate of 3.1 percent, according to the monthly report by Axiometrics.
The increase marked the first time the annual rate climbed above 3 percent since September 2013. In February, the growth was 2.8 percent.
According to the report, the occupancy rate of 94.5 percent in March is an increase of 20 basis points from February and represents a leap of 45 basis points from January.
Class A properties are currently on a five-month upswing, with rents increasing by 50 bps, year over year. Meanwhile, Class B properties generated the strongest annual effective rent growth. Class C, which had slowed slightly from the middle of 2013 through February 2014, saw its first uptick (about 20 basis points) since July 2013.
Axiometrics’ 2014 forecast predicts that occupancy will peak by mid-year, and should remain over 94 percent for the remainder of 2014, before falling off in 2015.
Based on a comparison of rent levels for new deliveries, new properties coming into the market are less affordable than they were in the previous cycle. With more expensive units being delivered, affordability can become an issue.
For example, in Atlanta, only 9 percent of renters can afford apartments built in the past two years, compared with 22 percent of renters for units built in the previous cycle. Still, the report shows, the new supply is absorbing very well with an average of 22 units per property per month from March 2013 to March 2014.
Austin is more affordable than Atlanta, but still, only 22 percent of renters can afford units built in the past two years, compared with 35 percent in the previous cycle.
Though Axiometrics tracks asking rent growth, more emphasis is placed on annual effective rent growth because of its direct effect on rental revenue.