March 2013 Apartment Market Summary, Effective Rent Growth via AXIOMetrics

As Q1 2013 came to a close, national effective rent growth softened to its slowest pace in the past 31 months. The growth rate had held fairly steady between 3.53% and 3.84% from June 2012 to February 2013, but dropped to 3.22% in March. While effective rent growth was weaker than in prior periods, the occupancy rate continued to strengthen, with a national average of 94.37% in March and with 38 of the top 88 Metropolitan Statistical Areas (MSAs) generating an average rate above 95.0%. As discussed in recent newsletters, Class A has been a drag on the national rent growth numbers over the past several months. Annual effective rent growth for these properties slowed to 3.1% in March and annual occupancy growth was slightly negative. In fact, there was very little separation between Class A occupancy (95.0%) and Class B occupancy (94.8%) in March. Likewise, Class B properties increased effective rents at a slightly better pace–3.3%–than Class A properties over the past year, but fell behind Class C properties, which produced a growth rate of 4.0%. Class C properties also have the best absorption rates, and this trend will likely continue as the occupancy rate still averages just 93.0%.

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