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Feb 01
2010
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In past analyses, MPF Research has drawn significant attention to the fact that 2009's new apartment completions have leased up remarkably well, considering the state of the economy. On net, in fact, these properties have accounted for virtually all the demand seen recently in most metros, as older projects have tended to lose residents over the past year. But what about the pricing in place for the communities finished recently?
Not surprisingly, the story is that rents are falling in the brand new stock, just as they are in the overall base of product.
Looking at a sample of 62 properties with 18,113 units where construction was completed during 1st quarter 2009, effective rents fell by an average of 4 percent during the ensuing three quarters.
Among metros with significant numbers of early 2009 completions, the biggest three-quarter drop in effective rents occurred in Houston, where rates declined 4.5 percent. Losses came in right around the 4 percent mark between March and December in Seattle and Dallas/Fort Worth, while backtracking of around 3 percent was seen in Phoenix, San Antonio and Austin.
There's one metro where average effective rents for early 2009 completions have jumped notably during ensuing quarters, and it's exactly where you think it is. Typical pricing at the end of 2009 was up 5 percent overall for Washington, DC's 1st quarter deliveries, though that calculation is skewed by the fact that a couple of communities have managed to post amazing rent growth around the 20 percent mark since wrapping up construction.
The rent cuts registering in properties as they move through initial lease-up actually have some pretty significant implications for the overall rent change figures that will be seen in the near term. The annual rent shift figures that MPF Research presents all are same-store calculations, looking at the exact same properties during two points in time. By definition, then, 2009 completions are excluded from the annual same-store rent change figures presented to date. But in 1st quarter 2010, early 2009's deliveries will move into that same-store sample set. Those additions will tend to hold annual same-store rent change in negative territory, even if other product manages to register some stability in pricing.
Originally published on January 29, 2009, by Greg Willett
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