In a recent article for National Real Estate Investor, author Bendix Anderson spoke with some industry experts to learn more about climbing occupancy rates and what they mean to the economy.
Multifamily occupancy rates have seen strong growth for over 10 years now, but the market continues to reach new levels. “Terrific absorption has pushed occupancy upward to highs for this economic cycle,” claims Greg Willett, Chief economist for RealPage, Inc.
The continued growth may seem strange to some as vacancy rates have been expected to increase with so many new builds coming to the market for years now, but rental demand has remained strong despite concerns of an economic downturn.
“You would think that the market would be mature… We’ve had 10 years now of really strong multifamily demand,” says Jeanette Rice, America’s head of multifamily research with real estate services firm CBRE. “It’s still positive as it has been for many years; in some ways, it is more positive.”
The average apartment occupancy rate in the U.S. rose to 96.2 percent in July, up 40 basis points from the year before, according to RealPage. That’s the highest the occupancy rate has been since 2000. So if occupancy rates are so high, why the tremors of concern?
In addition to approaching the end of the economic cycle, threats of escalating trade disputes with China and some volatility in the bonds market stand as threats to the economy’s wellbeing. Although, the multifamily market continues to see high demand thanks to larger demographic forces and low unemployment.
“There are more older renters than ever,” says Andrew Rybczynski, senior consultant with research firm CoStar Portfolio Strategy. “Younger cohorts, on the other hand, are renting at considerably higher rates than historical precedents… Millennials have delayed marriage and children.”
That said, Rybczynski also noted the high number of new builds are starting to slow which will result in a falloff in the market in the next two to three years.
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