Multifamily performance metrics have accelerated through the third quarter, according to a preliminary trend analysis from Moody’s Analytics REIS. The highest quarterly growth figures on record since REIS began publishing quarterly data in 1999, asking and effective rents increased 7.5% and 7.9%, respectively. This is triple from the prior record set in the third quarter of 2000.

Net absorption, at the highest level since the first quarter of 2019, exceeded the level of the first and second quarters combined. New apartment deliveries remained moderate, relative to expectations from the beginning of the year. In addition, the apartment vacancy for REIS’ top 79 metros was down by 60 basis points to 4.7%, which is back to the pre-COVID levels seen at the end of 2019.

Apartment vacancy in five metros remained unchanged, and the remainder saw declines in the third quarter. Charleston, South Carolina, and Raleigh-Durham, North Carolina, recorded the most quarter-over-quarter vacancy decline at -1.9%, followed by Birmingham, Alabama, at -1.6% and Orlando, Florida, at -1.5%.

According to the analysis, increases in effective rent are consistent with the vacancy declines across all 79 metros, with Phoenix, Orlando, and Tucson, Arizona, ranking at the top at 16.1%, 15.6%, and 15.3%, respectively.

San Francisco and Washington, D.C., are the only two metros that still haven’t recovered their respective effective rent levels on a rolling 12-month window, while the remaining 77 have exceeded their effective rent level from a year ago.

“The apartment recovery has accelerated, and for most metros the sector is now firmly in an expansion period,” said Lu Chen, a senior economist at Moody’s Analytics specializing in commercial real estate. “Additionally, office is signaling a market rebound supported by strong demand, and retrial has shown more relief of the market stress. Overall, it seems that we are heading toward an overall market recovery, but headwinds still remain. The global pandemic is not yet over, and the two-month cycle for each virus strain may still have its seasonal impact on each sector.”

Source: Multifamily Executive

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