New construction activity has obviously been focused in the large markets, as has industry attention in general at times.
As the current cycle continues to age, secondary and tertiary markets have been getting increased attention from owners and investors.
Entering Q4, here’s a summary of key performance metrics nationwide for primary, secondary and tertiary markets during the past 12 months, reported by ALN Apartment Data.
Through August, all three market designations had roughly the same average occupancy—about 93 percent.
During the previous 12 months, primary markets have seen average occupancy gain of 1.3 percent. This is due in large part to approximately 178,000 new units being delivered during the same span.
Demand was healthy, with 263,000 net new units rented during the year. This was not far enough beyond the new supply to make a jump in average occupancy because of there being about 8.2 million units in these ALN primary markets.
With just less than 20,000 new apartments and more than 32,000 net units absorbed, secondary markets managed an average occupancy gain of about 1.2 percent, putting it at 93 percent. Markets such as Birmingham, Louisville and Milwaukee drove occupancy gains with new demand outweighing new supply in the 12-month period by a large margin.
Net absorption surpassed new supply in the tertiary markets as well. Approximately 33,000 new apartments were added in these areas, but 43,000 units were absorbed. This was enough to drive a 1.1 percent improvement in average occupancy. What is interesting about the tertiary markets is the geographic spread of the strong absorption.
Demand wasn’t centered in a specific area where a local economic event could affect conditions. Individual tertiary markets in states such as Louisiana, Arkansas, Hawaii, Idaho, South Carolina and South Dakota absorbed more than 5 percent of their capacity during the past year.