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February Metrics Up Apartment Market at 44-Mo.
High Contributed by Stephanie McCleskey, March 16, 2015
Anybody who thought the strength that fundamental apartment market metrics demonstrated in 2014 would suddenly change with the new year thought wrong. Annual effective rent growth, for one, has reached heights not seen in 44 months.
The annual effective rent growth rate was 5.0% in February 2015, the second time in three months the metric has reached that mark – when rounded to one decimal place. Extending the figure a second decimal place, we learn that February’s rate of 5.05% was 8 basis points (bps) higher than December 2014’s 4.97, according to Axiometrics’ apartment market research.
The last time the annual rent growth rate exceeded Febuary’s was in July 2011, when rents increased 5.3%.
February’s annual effective rent growth rate was 16 bps higher than the 4.9% of January 2015 and 223 bps above the 2.8% of February 2014 (which was the second lowest annual effective rent growth rate in the past three years).
Year-to-date (YTD) rent growth was 1.0% in February, tied for second with 2010 and 2012 among post-recession years, and behind only 2011. The February rate was also 10 bps higher than the post-recession second-month average of 0.9%, according to the apartment data.
As the chart below shows, however, predicting full-year performance from February metrics isn’t always viable. Though 2011 tops the February list, it finished the year in third place. And 2014 ended up as the strongest post-recession year though it was near the bottom of the February rankings.
Occupancy Reverses Down Streak
February’s occupancy rate of 94.7% was the highest of any February since the end of the recession. This marks the 61st straight month in which the occupancy rate has been higher than the same month of any preceeding year since 2009.
More importantly, the February increase of 12 bps from January’s 94.6% occupancy ended a five-month streak of occupancy rate decreases since the metric reached its post-recssion peak of 95.2% in August 2014. The February 2015 rate is a 45 bps increase over the 94.3% of apartments occupied in February 2014.
Denver Rises to 2nd, but California Still Dominates
As mentioned above, Denver rose to second place in annual effective rent growth among Axiometrics’ top 50 markets, breaking the grip that San Francisco Bay Area metros have had on the top two spots for the better part of the last year. Denver’s 12.7% rent growth was enough to displace San Francisco from the No. 2 spot.
But fear not for the Bay Area, as its three metros were all among the top four. Oakland remained No. 1 with 15.5% annual rent growth in February. Oakland also had the second-highest occupancy rate out of Axiometrics Top 50 markets at 96.6%, behind only New York’s 97.0%. That’s 180 basis points above the national occupancy rate, which was 94.8%.
Seven out of 17 markets on the list below are California markets, and three are in Florida.
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