Average rent for apartments hit a record high of $1,136 in May in 61 U.S. markets surveyed by multifamily data provider Yardi Matrix, marking a 6.1 percent increase year over year and a 2.3 percent jump over the last three months and prompting Yardi Matrix to predict that the market could exceed annual growth of 4.9 percent during 2015.
While the Northeast appears to be the worst region for May-to-May rent growth, some of its gateway and primary cities have experienced notable increases in overall unit values during the past three months.
Spanning the past 12 months, rents grew by 2.1 percent in D.C.; however, during the last three months the nation’s capital ranked as the ninth-strongest metro for rent growth, sporting a 0.9 percent uptick. This improvement would indicate that significant absorption of new product is occurring.
Rents in Philadelphia rose by less than 4 percent year to year, but increased by nearly 1 percent during the last 90 days — ranking 11th in terms of recent growth.
To the north, Boston saw overall rents rise by 1.4 percent during the last three months. The percentage ranks Boston as the third-best market for recent value increases.
Yardi Matrix cites the strong performance of upper-end “lifestyle” properties as the primary cause of the recent uptick. Strong performance among luxury product suggests growth in high-income jobs and the gentrification of more expensive urban areas.
Outside of Boston and D.C., other metros that ranked in the top 10 for recent rent growth included Jacksonville, Florida, and Portland, Oregon, which led the nation with increases of roughly 2 percent. Sacramento, Seattle, San Francisco, Southern California’s Inland Empire, Denver and Orlando, Florida, rounded out the list, with all experiencing more than a 1 percent uptick in rents.
It’s worth noting that rent growth is occurring in some of these markets despite a negative ratio of job growth to new supply — specifically San Francisco and Seattle. In these markets, job growth trails new supply by 0.5 percent and 0.4 percent, respectively. The fact that rent growth continues speaks to the pent-up demand that formed during the last downtown when job growth was improved.
Of the 61 markets surveyed, only Nashville, Tennessee saw rents decline over the past three months. A focus on lower-paying service jobs is cited as a reason for this dip.