Are Class A Rents Rebounding?
Digested from Axiometrics
National apartment inventory growth has been robust, with 288,000 units delivered in 2016 and more than 393,000 scheduled to come online in 2017. Class A apartment communities account for a large portion of this new supply, and rent growth for this asset type has slowed in some submarkets in the face increased competition.
But the Class A rent growth is now stabilizing and growing, according to data from Axiometrics.
“Nationally, Class A rent growth is on the rebound, growing by an annualized rate of 1.0% in January and 2.0% in February,” writes Axiometrics analyst Louis Rosenthal. “This is what we would expect to see when markets (either national- or metro-level) hit bottom and begin to turn around: Class A generally rebounds first, a harbinger of an improved real estate market.”
Denver is a good example of what is expected to happen in other submarkets as Class A supply slows. The Mile-High City saw rents reach new heights in 2015, but a new wave of supply moderated rent growth last year. Even though construction is still above the metro area’s long-term average, Class A apartment communities have comparatively less competition now. In February 2017, Denver’s rent growth and occupancy rate improved from a year earlier.