Two strong multifamily markets illustrate new realities
Florida and Atlanta highlight how new supply is driving down rent growth.
RealPage took a recent look at the two strong markets of Florida and Atlanta and compared actual year-over-year demand rent growth as of August 2023 and year-over-year inventory growth for the year. Here’s what I found: Too much new inventory and not enough apartment renters, creating downward pressure on rents. But this trend has not yet occurred in all other markets.
Florida for this study was ranked last From the second quarter as the third fastest growing region at 3%, behind the Carolinas at 3.6%, Mountain/Desert at 3.2% and ahead of the Southeast at 2.6%. But all those new apartments mean pressure on rental growth, which in August fell 0.7% in Florida, versus -0.5% in the Carolinas, -2.1% in the Mountain/Desert and -0.2% in the Southeast.
Other regions in this survey saw other downturns but also some upswings, with the Midwest and East Coast seeing positive year-over-year rent change of 3.1% and 2.5%, respectively. Others surveyed included Texas, which had year-over-year net inventory growth of 2.3% and rent change of -0.3%; The Midwest with a net inventory growth of 1.4%, the East Coast with a net inventory growth of 1.2%, and finally the West Coast with a net inventory growth of 1.1% and a rent change of 0.8%.
Atlanta saw similar results Insufficient number of apartment occupants to keep up with the new supply. As a result, occupancy and rent have dropped to new lows recently, according to another RealPage report. Atlanta, like other Sun Belt apartment markets, has recovered post-COVID and has seen strong in-migration. New apartment deliveries reached an all-time high of 16,715 units in the second quarter of the year ending, with a further 36,575 units in the works and 22,000 units scheduled for completion this year. The market also has a large number of built-to-rent properties coming to the area, placing it third in this category.
But there weren’t enough apartment seekers to compensate, causing occupancy to drop to 92.6%, its lowest level since February 2014, more than the overall decline in the country. This is happening more in suburban submarkets than in urban centers since 2021. Class C shares have also lost more ground in the past two years than A and B properties, as many have sought quality. In Category (C), the occupancy rate decreased to 91.8% compared to 93% for Categories (A) and (B).
How has the city’s asking rent changed? It also turned negative in May of this year and has been getting worse. As of August, prices were down 3.7%, the worst performance in two decades. Urban subs saw a larger decline in rents but not much worse than did the suburbs. Rents also decreased in Class C inventory last year compared to Classes A and B.