The Significance of the Apartment Sector’s Strong Q2 Performance
The return of some traditional headwinds, which had disappeared in recent years, made 2nd quarter 2013 a critical period for the U.S. apartment industry. And the robust results provided evidence that the apartment sector is still in strong shape.
The U.S. apartment market faced a point of vulnerability in Q2 2013 and it passed with flying colors. The immediate outlook is that the market will sustain the momentum it gained in Q2 through Q3 and then register only a mild backslide during the fourth quarter of 2013.
One reason why Q2 results were so important, looking beyond the normal seasonality, was because operators and owners knew they would be dealing with more churn during this particular period, especially at the top end of the market.
The question then faced by owners and operators was whether or not they were going to get enough new renters coming in to replace whoever they were going to lose. And based on the job production numbers at the time, it wasn’t clear entering second quarter whether the market would have those replacement renters or not. But it did and in a really big way.
Consequently, the top part of the existing marketplace remained pretty full and operators got more aggressive on pricing those units.
One thing that jumps out when looking at the new construction numbers is that this year’s scheduled completions are stacked towards the second half of the year. About 60,000 units were completed in the nation’s top 100 markets in the first half of the year. But in the second half of the year, there are approximately 90,000 apartment units scheduled for completion.
With that in mind, MPF Research anticipates that occupancy for Q3 will hold steady at the 95.3% mark attained during Q2 and for rents to climb about 1.0% quarter over quarter, matching the growth number from Q3 2012.
In Q4, MPF expects that occupancy will most likely backtrack a little when you factor all the new product coming online combining with the traditional seasonal slowdown. Occupancy should drop about 50 basis points by the end of the quarter. As for pricing, MPF expects rents to remain around same numbers attained during Q3.
Overall, it’s not a bad outlook for the remainder of the year.
Source: PropertyManagementInsider.com - by: Jay Parsons 7/8/13
The U.S. apartment market faced a point of vulnerability in Q2 2013 and it passed with flying colors. The immediate outlook is that the market will sustain the momentum it gained in Q2 through Q3 and then register only a mild backslide during the fourth quarter of 2013.
Apartment Market Performance Robust Despite Resident Churn
One reason why Q2 results were so important, looking beyond the normal seasonality, was because operators and owners knew they would be dealing with more churn during this particular period, especially at the top end of the market.
The question then faced by owners and operators was whether or not they were going to get enough new renters coming in to replace whoever they were going to lose. And based on the job production numbers at the time, it wasn’t clear entering second quarter whether the market would have those replacement renters or not. But it did and in a really big way.
Consequently, the top part of the existing marketplace remained pretty full and operators got more aggressive on pricing those units.
U.S. Apartment Market Forecast for Q3 and Q4
One thing that jumps out when looking at the new construction numbers is that this year’s scheduled completions are stacked towards the second half of the year. About 60,000 units were completed in the nation’s top 100 markets in the first half of the year. But in the second half of the year, there are approximately 90,000 apartment units scheduled for completion.
With that in mind, MPF Research anticipates that occupancy for Q3 will hold steady at the 95.3% mark attained during Q2 and for rents to climb about 1.0% quarter over quarter, matching the growth number from Q3 2012.
In Q4, MPF expects that occupancy will most likely backtrack a little when you factor all the new product coming online combining with the traditional seasonal slowdown. Occupancy should drop about 50 basis points by the end of the quarter. As for pricing, MPF expects rents to remain around same numbers attained during Q3.
Overall, it’s not a bad outlook for the remainder of the year.
Source: PropertyManagementInsider.com - by: Jay Parsons 7/8/13
DISCLAIMER: This blog has been curated from an
alternate source and is designed for informational purposes to highlight the
commercial real estate market. It solely represents the opinion of the specific
blogger and does not necessarily represent the opinion of Pacific Coast
Commercial. www.PacificCoastCommercial.com
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