Top 6 Cities for Highest Rent Growth
- Jun 30, 2015
Average multifamily rents nationwide “continue to flourish at historically robust levels,” a situation highlighted by an increase of 6.3 percent over the past 12 months, according to a report released Monday by Yardi. Based on data from 100 U.S. markets, the June 2015 edition of Yardi’s Matrix Monthly also reported a 1.3 percent month-over-month rent increase in June, the largest increase during the current recovery.
Multifamily rents have been bolstered by ongoing job growth, pent-up demand from millennials and favorable demographic factors, the report stated.
Better yet for multifamily property owners, rent growth actually has accelerated, according to the report. The average national rent grew 1.3 percent month over month and 2.9 percent over the last three months, versus 1.1 percent and 2.3 percent in 2014, respectively. The report cautioned that this surge is somewhat seasonal, since apartment rents tend to rise more in the spring, but nonetheless noted that the latest one- and three-month increases “represent the fastest rent growth in several years.”
“Far from slowing down, apartment rents continue to grow robustly in many markets with strong employment growth and in-migration from Millennials and retirees,” Paul Fiorilla, associate director of research at Yardi Systems Inc., the publication’s parent company, told Commercial Property Executive. “Although rents can’t continue to grow at the current rate, we do expect multi-family absorption to remain solid this year, which means owners should find tenants to fill the large amount of new supply.”
Unsurprisingly, the rent growth was led by the West Coast and the Sunbelt. Portland (15.1 percent), Denver (12.4 percent), San Francisco (11.6 percent) and Sacramento (11 percent) led the growth on a year-over-year basis, while Jacksonville (13.2 percent) and Atlanta (9 percent) are among the southern markets with the strongest recent growth.
Though the Northeast, Mid-Atlantic and Midwest regions aren’t as stellar, the report concluded that “rent growth is strong across the country.” Only six of the 100 markets surveyed did not reach 4 percent year-over-year rent growth: Kansas City (3.5 percent); Albuquerque (3.2 percent); Philadelphia (3 percent); Washington, D.C. (2.7 percent); Baltimore (2.5 percent); and Richmond (1.4 percent).
The rate of new household formation, which hit a multi-year high of 2 million in 2014, will continue at above-trend levels, said Fiorilla, due to pent-up demand from Millennials who are getting jobs and now are able to move out of their parents’ homes, or to live on their own instead of doubling up with roommates. The large number of new household units, he added, will produce demand for both apartments and single-family homes.