RealPage Reports on State of Apartment Market Heading Into 2017; Covered by Wall Street Journal
Generated by its MPF Research division, RealPage’s year-opening report on the current apartment market drew attention from a number of major news outlets including The Wall Street Journal, which based a January 2nd article on the current oversupply in the luxury segment as reported by RealPage.
With the glut confined to luxury apartments, however, the report documents overall “robust apartment demand and occupancy” despite a slowdown in the pace of rent growth. Scheduled deliveries for 2017 are up 26% over 2016, a year that itself saw the third highest apartment demand for any calendar year during the past three decades. During the final quarter of 2016, the market soaked up four times the volume that it did during the same quarter of 2015.
MPF’s Jay Parsons discusses market findings with Kelly Evans, co-anchor of CNBC’s “Closing Bell.” The research was also the basis of an article in The Wall Street Journal.
As reported by the press, luxury apartments account for most of the vacancies in an otherwise strong market. Landlords of expensive new apartments in downtown markets are likely to be offering significant concessions over the coming months as even more supply comes online, both news sources conclude.
Though rent growth across all property classes slowed from 5% in 2015 to 3.8% in 2016, the RealPage release points out that this rate is still “well above the long-term historical norm.” Therefore it should not be interpreted as an indication of weakening prices, but rather prices that aren’t rising quite as quickly as they have been.
The top five leaders in rent growth for 2016 were all located in the West: Sacramento, Riverside-San Bernardino, Seattle, Phoenix and Las Vegas. Areas where rents have actually dropped include New York City, Houston, San Jose and San Francisco.
Scheduled completions would normally indicate that deliveries would peak in 2017. But since labor shortages and other factors have been holding completions in this market cycle about 10% to 15% beneath the volumes scheduled initially, actual deliveries could end up at about exactly the same level as in 2016, reducing the fear of oversupply and downward price pressure across the broad market.