Where Apartments Are Heading in 2016
There is no denying that 2015 was a remarkable year in the multifamily sector of real estate. Vacancies were low, rent growth was high, and the number of renters rose by 1.8 million. Records were broken throughout the year and Americans paid nearly $20 billion more in rent in 2015 than 2014. So, with 2015 being an anomaly of a year, what does that mean for 2016?
Rent Growth
According to MPF Research, rent growth and occupancy levels hit a historic high last year at 5.6% growth and 96.1% occupancy. While usually the rent growth trend is always a bell curve, the past few years it has been on a steady incline – not a typical cycle.
According to Multifamily Executive, the main factor for rent growth is supply and demand factors. In 2015, 243,653 new units delivered and there is expected to be 307,318 units in 2016. Ric Campo, CEO of Camden Property Trust, says that even with the five great years in multifamily, 2016 looks like it will be another above-long-term trend year because there seems to be enough demand to keep rents growing.
MPF projects a 4.3% rent growth for 2016. While that’s a 130-basis-point drop from last year, it’s still well above the historical average of 2.5% to 3%.
Apartment Markets
With another year of rent growth, that may leave some wondering what markets are the most affordable and least affordable. Below is a chart from Axiometrics that shows just that.
Rent Trends
So far, January rents start off strong according to a Yardi Matrix report. The average national rental rate increase of $5 brings to an all-time high of $1,170 in January. Year over year, rents increased nationally by 6.2% in January. Portland, Ore., the lead performer of the year, rose 13.9% overall and also topped both the renter-by-choice and working-class renter lists. Many experts are predicting a strong 2016 with rents still increasing at a above normal rate.
Amenities
Amenities are playing a very large role in selecting apartments nowadays. Renters are having to pay more than they have ever had to before and want the latest and greatest amenities. According to the 2015 NMHC/Kingsley Apartments Resident Preferences Survey the top 5 community amenities are:
- Parking – 94%
- Pool – 83%
- Fitness Center – 82%
- Secured Community Access – 80%
- Recycling – 80%
The top 5 home amenities are:
- High- Speed Internet – 94%
- Walk-In Closet – 89%
- Soundproof Walls – 88%
- Patio or Balcony – 87%
- Washer/Dryer in Unit – 87%
Being pet friendly and having pet amenities is also huge with today’s renters because over 30% of apartment renters own a pet.
In 2016, we are sure to see some of the “coolest” properties being built with top of the line amenities. The top amenities predictions for 2015 are:
- Rooftop Terrace
- Bike Friendly
- Pet- Friendly
- Improved Common Areas
- Group Exercise Classes
With 2015 being such an explosive year in the multifamily sector and strong reports from January, we are sure that 2016 won’t disappoint.