Undoubtedly, this is impressive growth, and it should continue for the foreseeable future, absent a recession. This is in large part due to a slowdown in construction starts. Multifamily apartment starts fell by about 10,000 units from the beginning of 2017 to the start of 2018, which should impact deliveries in 12 to 18 months. With demand remaining strong, and deliveries slowing, occupancies likely will remain tight, keeping pricing power firmly in landlords’ hands.
Some markets are far outperforming the national benchmark, however. Orlando, Las Vegas and Jacksonville led the nation in rent growth over the past year. All three markets topped 5.5 percent annual rent growth between May of 2017 and May of 2018, with Orlando posting an eye-popping 6.3 percent growth. Other top markets for rent growth include Sacramento, Phoenix and Tampa.
At the same time, economic growth has returned in earnest in these markets. All have outperformed U.S. job growth for the past few years. Occupancies in aggregate have approached 94 percent, giving landlords confidence to push rates aggressively.
It’s unclear how long this level of growth will last, particularly in Orlando. While it’s currently leading the nation in rent growth, developers have gotten the message, as roughly 7 percent of Orlando’s inventory is under construction. Las Vegas, meanwhile, isn’t seeing the level of construction it has had in previous cycles. Less than 3 percent of its inventory is underway, which is far less than the more-than-5 percent it had underway at the peak of the last cycle.