The U.S. multifamily sector experienced a 5 percent rise in effective rent growth year over year in April and a 2.7 percent increase in rents since the beginning of this year. This overall growth can mainly be attributed to a consortium of cities where rents rose by at least 6 percent over the past 12 months.
Four cities — Oakland, California; Denver; San Jose, California; and Portland, Oregon — all experienced double-digit increases in rents during the past 12 months, according to Axiometrics, an apartment research firm.
Oakland led the way with a 14.8 percent increase, followed by Denver at 11.5 percent, San Jose at 10.8 percent and Portland at 10.6 percent.
While Oakland doesn’t have a significant project delivery pipeline, Denver, San Jose and Portland will see a number of luxury properties reach completion in the coming months, which could further bolster overall rent growth depending on leasing velocity and concessions offered by developers.
Having achieved significant rent growth, more owners of existing properties in these markets may look to cash in on these properties during the second half, leading to an increase in overall transaction volume.
Of the top 17 markets for rent growth, eight are located in California and three are in Florida. San Francisco and Sacramento both witnessed annual increases of 9.3 percent.
Riverside, Anaheim, Los Angeles and San Diego all saw rents climb between 6.2 and 6.6 percent during the same period.
Orlando rents rose 6.7 percent while West Palm Beach and Fort Lauderdale rents jumped 6.4 percent and 6.3 percent, respectively.
Other markets in the top 10 in terms of rent growth included Seattle (7.6 percent), Atlanta (6.9 percent) and Phoenix (6.7 percent).
Owners and managers of existing assets in certain submarkets of Washington, D.C., and Houston may have a difficult time pushing rents this year.
These markets have current overall vacancy rates of 7.6 percent and 6.9 percent, respectively, and a significant pipeline of project deliveries in the next 12 months.
Additionally, rent increases over the past few years have now caught up with tenants’ paychecks in these markets. As a result, existing properties may have a difficult time pushing rents by more than 2 percent during the remainder of this year.
