Seattle and San Jose Rentals Sizzle

Seattle and San Jose Rentals Sizzle

Quarterly rent increases sizzled at 3.1% in the Seattle and San Jose Metropolitan Statistical Areas (MSAs) according to second quarter survey results released on 15 July by Realfacts. These rates translate to monthly average rent increases of $31 and $47, pushing total rents to $1,035 and $1,569 respectively. If these quarterly rates continue, both MSAs will have annual rent growth of 12.4%. The MSAs also reported strong occupancy, with Seattle holding steady just above 95% and San Jose continuing to increase, up to 97.3% from 96.5% last quarter.

Seattle and San Jose Rentals Sizzle

Consolidating the Coastal Northwest’s position as rent growth leader the Portland OR and San Francisco MSAs reported 2% and 2.6% quarterly rent growth, adding $16 and $38 to monthly rent, bringing overall average rents up to $820 and $1,499 respectively. These quarterly rates annualized will yield rent growth of 8% and 10.4%. Both MSAs also reported strong occupancy at 95.7%.

Looking at annual rent growth rates, 10 of the 29 major MSAs in the RealFacts database reported annual rent growth over 5%. The Coastal Northwest lead in longer term annual growth also, with San Jose at 11%, Seattle next at 9.9% followed by Portland at 7.2% and San Francisco at 7.1%. Joining the MSAs with over 5% annual rent growth this quarter are Austin and Fresno, both at

5.4%. Rounding out the top ten are Los Angeles at 6.8%, Oxnard-Thousand Oaks at 7.2%, Salt Lake City at 6.8% and San Diego at 5.5%.

Previous annual rent growth leaders Phoenix, Las Vegas, and Riverside-San Bernardino continued to slide, reporting annual rent growth at 3.7%, 3.3% and 4.1% respectively. As these three slid two MSAs that had been losers for a long time look poised to join the over 5% club. If the quarterly gains recorded during the second quarter by Denver and Tulsa of 1.7% and 1.3% continue for a whole year they will post annual rent growth of 6.8% and 5.2% respectively.

Increase in Overall Occupancy

Overall occupancy remained strong with every major MSA over 91.5%. Nineteen MSAs reported occupancy between 93% and 96%, reflecting the stability of most markets, with apartments available and room for some rent growth. Tulsa OK stood out, posting a 4.7% occupancy gain, up to 96.6%. All 11 of the quarterly occupancy declines were less than 0.5%, further demonstrating the overall stability of the markets.

Sales prices for apartment properties are up so far in 2007 according to data collected through the second quarter. The average price per unit increased to $101,971, up from $96,135 for all of 2006.

Across the 15,000 U.S. apartment properties that M/PF YieldStar surveyed in 2007’s 2nd quarter, rent concessions were reported for 36 percent of the stock. That’s not much different than the 33 percent of inventory featuring rent giveaways a year earlier in mid-2006. What is dramatically different, however, is where those concessions are being offered. Some of the country’s previously high-flying apartment market performers now are experiencing more competitive leasing environments, bringing rent specials back into the picture. Conversely, other markets that had been struggling are gaining momentum, allowing rent discounts to drop by the wayside.

The country’s biggest increase in the use of concessions over the past year occurred in Sacramento. The share of product there featuring rent discounts jumped to 57 percent as of June 2007, up 37 points since mid-2006. Likewise, use of concessions shot up 30 points or more across West Palm Beach, Orlando, Tampa and Tucson. On the flip side, Salt Lake City’s share of apartments offered at discount eased to 12 percent as of mid-2007, down 45 points from the mid-2006 rate of 57 percent. The share of properties giving away free rent plunged by 20 to 30 points in St. Louis, Cincinnati, Charlotte and Raleigh.

Expected near-term trends in rent positioning across the Southeast’s major cities will be analyzed at M/PF YieldStar’s upcoming Southeast Apartment Markets Conference in Atlanta on September 12. Core metros addressed at the event are Atlanta, Charlotte, Raleigh, Orlando, Tampa and South Florida. Also, this year’s conference features the introduction of neighborhood-level data for Nashville, Memphis, Jacksonville, Greensboro, Greenville and Birmingham.

1. I resolve to stop using photos of my pool and my sign in my advertisements.

2. I resolve to optimize my website and remember that all flash websites are not good for search engines.

3. I resolve to redo my model apartments if they are decorated in any of the following themes: Southwest; mauve and blue; ugly and dated; not reflective of my demographic; too foofy; anything from the 80’s; are overwhelmed with silk flowers, weird looking fake food, or really bad fake electronics.

4. I resolve to actually track my advertising in 2008 so I really know what is working and what isn’t.

5. I resolve to not use any websites or services that use those horrible computer voice things that read with no emotion (like those terrible podcasts that are on some websites).

6. I resolve to make sure my leasing team is trained on things like generational and gender based differences in selling.

7. I resolve to make sure the career apparel I select for my site team members is flattering and is something that I would actually wear.

8. If I work at the corporate office in an upper level management position, I resolve to work on-site this year for three consecutive days at one of my company’s toughest properties, preferrably on very busy days.

9. I resolve to look for marketing ideas OUTSIDE the apartment industry.

10. I resolve to make sure the people that make the marketing decisions at my company are qualified and do an outstanding job.