After the U.S. apartment stock grew more than 2 million units during the past decade, the volume of annual completions will climb further as the 2020s begin, according to real estate technology and analytics firm RealPage, Inc. Scheduled deliveries this year jump to 370,942 units, up 50 percent from the 2019 total of 246,779 units.
“Developers have struggled to produce enough new housing to meet demand in recent years,” according to Greg Willett, chief economist at RealPage, Inc. “However, the volume of apartments on the way in 2020 certainly could test the market’s ability to absorb a big block of additional units in a short time frame.”
“The big jump in deliveries during 2020 means it’s likely that occupancy will slip a little from 2019’s record level. Pricing concessions, including periods of free rent, should be common at the new properties building an initial base of residents. Rent growth should slow for existing luxury projects in neighborhoods where construction is heaviest.”
RealPage pulled specific fourth-quarter data for Phoenix, which includes:
• Phoenix received 6,981 new apartments in 2019, but the number of new units will increase about 60 percent in 2020.
• Apartment rents are growing faster in Phoenix than any other market in the nation. Rents increased 8.1 percent in 2019 in Phoenix.
• Monthly rents now average $1,184 in Phoenix, about $230 below the national norm.
• Apartment occupancy in Phoenix is up about 0.5 percentage points in 2019 to stand at 96 percent at year-end.
Occupancy Hits Near-Record Level, and Rents Rise
Apartment occupancy at the end of 2019 stood at 95.8 percent. Since leasing is always seasonally slow in the fourth quarter, that figure is off from the rate of 96.3 percent posted in the third quarter. Still, late 2019 occupancy topped the year-earlier reading of 95.4 percent.
Rents for new-resident leases climbed 2.8 percent in 2019. The nation’s annual rent growth pace has been holding around the 3 percent mark since late 2016. Today’s average price is $1,414 per month.
Among the country’s large metros, the local rent growth leader is Phoenix, posting an annual increase in pricing of 8.1 percent. Other large metros logging year-over-year rent growth that tops 5 percent are Las Vegas and Nashville.
Completions Set to Double in Some Locations
Dallas/Fort Worth, which has led the country for apartment construction throughout the current economic cycle, again will be the delivery leader in 2020. Scheduled completions in North Texas total about 26,000 units, up 14 percent from the 2019 volume.
Other key construction centers this year include Los Angeles, Washington, DC, and Houston, set to add some 16,000 to 18,000 units apiece. Those three metros are among the locations where deliveries will climb the most, as completions scheduled for 2020 roughly double new supply finished during 2019.
This year’s additions also should come on stream at twice the 2019 pace in Boston, where new supply is anticipated at more than 11,000 units.