Apartment Rent Growth Spreads to More Metros

While 2nd quarter 2010's 1.2 percent jump in U.S. apartment rents was the first meaningful increase in pricing power seen during the current market cycle, the boost was encouraging widespread. It wasn't just a handful of areas getting back on track ... at least minor upticks occurred almost everywhere.

Across the 64 metros that form the core of MPF Research's apartment market analysis, 56 of them realized effective rent improvement during 2nd quarter, measuring change on a same-store basis. One city (Memphis) registered identical rents in March and June, leaving just seven metros suffering further declines. Quarterly losses of more than 1 percent were limited to Tucson, Las Vegas and New Orleans.

The strong quarterly showing pushed annual rent change into positive territory for a total of 25 metros as of June, up from just seven as of 1st quarter. The nation's top 10 performers for rent growth proved to be an incredibly mixed bunch in terms of general characteristics. They stretched from the East Coast to the West Coast. Some were large, others small. A few maintained their momentum after doing reasonably well during the national downturn, whereas others regained considerable ground that was lost during 2008-2009.

El Paso, the nation's strongest overall performer of late, remains red hot. Effective rents soared 7.7 percent during the year-ending June. If you're thinking El Paso can support some additional development, you're right. If you're thinking this tiny market can immediately support the number of units that appear to be at the starting gate right now, it looks pretty doubtful.

New York is defying the expectations of some analysts that it would lag the nation in overall recovery. Effective rents have moved ahead by 5.8 percent year-over-year, recapturing most of the losses seen earlier.

Northern New Jersey is riding New York's coattails and also looks good now. Pricing power improved by 3.5 percent between mid-2009 and mid-2010.

Baltimore didn't do too badly during the downturn, as annual rent loss at the worst point was limited to less than 2 percent. Effective rents already are reaching new all-time highs, after growth during the year-ending June came in at 2.8 percent.

Colorado Springs is another place where 2008-2009's performance deterioration was fairly mild compared to the numbers posted elsewhere. Annual change in effective rents turned positive again during the first few months of 2010, and rates were up 2.6 percent on a yearly basis as of June.

Washington, DC certainly ranked as the nation's best-performing mega-market in the 2008-2009 time frame, and annual growth in effective rents as of mid-2010 proved fairly healthy at 2.4 percent. Not-uncommon expectations that metro DC has a rent growth spike ahead, however, might be too optimistic. A continuing flow of new supply moving through initial lease-up could keep annual rent growth at levels only a little stronger than the results registering now.

Greenville has recorded some of the most drastic swings in momentum seen anywhere in the country. At the past cycle's worst point in fall 2009, effective rents in South Carolina's Upstate market were down more than 6 percent on an annual basis. However, rapidly-improving occupancy in 2010 has given operators more confidence. They put in place big rent increases during 2nd quarter, with pricing now up 2.1 percent on an annual basis.

Fort Lauderdale logged a stellar all-round performance during 2010's initial half, and effective rents as of June were up 1.8 percent from the year-earlier figure. For some time, MPF Research has been saying that, once recovery begins in the Florida markets, look for Fort Lauderdale's stats to really take off. It appears that shift is occurring.

Ventura has seen annual change in effective rents swing dramatically from a loss of nearly 7 percent during most of 2009 to a gain of 1.5 percent as of mid-2010. Operators may have jumped the gun a little bit in pushing rents in this one. While occupancy is high here, this was one of the few locales anywhere in the country where some net move-outs registered specifically during 2nd quarter.

San Jose ranks among the nation's most impressive turnaround markets for 2010. Annual rent loss was at 10 to 11 percent during most of 2009, but June 2010 pricing actually beat mid-2009's results by 1.2 percent. A sharp rent spike is not only possible here during the near term, it actually looks pretty likely.

Statistical information presented in this post is acquired, to some degree through property management software and data collation at the city and county level.

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