ATLANTA, GA (Feb. 6, 2012) – The U.S. apartment market has performed spectacularly in recent years, and the sector will continue to roll in the years ahead as “Echo Boomers” enter the workforce.
Guests on the most recent episode of the “Commercial Real Estate Show” shared those observations and others in a wide-ranging update on the market. Topics included occupancy rates, rent growth, future development locations and a “game-changing” way of setting rents.
The overall national apartment occupancy rate was 93.5 percent in 2011, said Ronald G. Johnsey (top right photo), president of AxioMetrics Inc. The 2012 rate should climb to 95 percent, he predicted. Apartment rents grew by 4.1 percent last year, and are expected to grow by 5.5 percent in 2012, Johnsey added.
Class C apartments have lagged slightly in occupancy when compared to Class A and B, but “this is the year we’re going to fill in Class C,” Johnsey said. “We’re going to see the occupancy rates in all classes get closer to 95 percent, and that’s going to create really strong pricing power.”
The entrance of Echo Boomers – those born in the 1980s and early 90s – into the rental pool is another reason why Johnsey is predicting a long-term bull market for the sector. Echo Boomers are getting married later and often carry significant college debt – two factors that decrease their likelihood of buying a home in the near future, he noted.
Doug Culkin (middle left photo), president of the National Apartment Association, said new development should start topick up noticeably in 2013 and 2014. Apartment developers are not only seeking land on the ever-popular East and West Coasts, but also in college towns, where demand is being created in part by empty nesters “looking for culture,” Culkin said.
Developers have made “a real move to quality” when it comes to locations, said Ernie Eden (middle right photo), a senior vice president in Bull Realty’s Apartment Group. “If you’ve got a great location, there’s all sorts of interest on the part of developers,” especially if the site is in an infill area of a large city, he added.
Revenue-management software – which sets the rent for a unit using sophisticated algorithms that take into account everything from seasonal demand to the economy – “has become the game changer in the apartment industry,” said Chris Burns, president of the Atlanta Apartment Association and a regional vice president with Lincoln Property Co.
By taking human nature out of the rent-setting process, apartments can take in more revenue, Burnssaid. Lincoln properties that have instituted the pricing system have seen up to 8 percent increases in revenue, he noted. Hotels and airlines use similar systems to set prices.
“That’s amazing that you can get that much better performance out of that system,” said show host Michael Bull (lower left photo), founder and president of Bull Realty. The system automatically adjusts new rents and renewal rents on a daily basis based on demand and other market factors.
, The next “Commercial Real Estate Show” will be available Feb. 9 and will examine how businesses can use Twitter.
America’s “Commercial Real Estate Show” is a national talk radio show about commercial real estate. New shows are available beginning every Thursday at the show website, www.CREshow.com. Shows are also broadcast on AM stations, including Atlanta station Biz 1190 WAFS on Saturdays at 10 a.m. Show podcasts are available on-demand on iTunes and the show website.
The show host is 30-year commercial real estate veteran Michael Bull, CCIM. Michael is the founder of Bull Realty, Inc, a regional commercial brokerage firm with three offices headquartered in Atlanta, Georgia.
To learn more about the U.S. apartment market, please contact Stephen Ursery, sursery@wnspr.com
