Rental apartment investors to see slow growth in 2020

by Steve Randall16 Jan 2020

An increase in apartment completions this year is likely to mean slower growth for rents in many areas.

A new report from real estate technology and analytics firm RealPage reveals that scheduled deliveries in 2020 are set to jump 50% year-over-year to 370,942.

“Developers have struggled to produce enough new housing to meet demand in recent years,” according to Greg Willett, chief economist at RealPage, Inc. “However, the volume of apartments on the way in 2020 certainly could test the market’s ability to absorb a big block of additional units in a short time frame.”

At the end of 2019, the apartment occupancy rate was 95.8%, slightly lower than the 96.3% of the third quarter due to the usual seasonal dip, but up from 95.4% at the end of 2018.

Rents for new-resident leases climbed 2.8% in 2019 with the nation’s annual rent growth pace holding around the 3% mark since late 2016. Today’s average price is $1,414 per month.

But rent growth and occupancy rates could be challenged this year Willett adds.

“The big jump in deliveries during 2020 means it’s likely that occupancy will slip a little from 2019’s record level. Pricing concessions, including periods of free rent, should be common at the new properties building an initial base of residents. Rent growth should slow for existing luxury projects in neighborhoods where construction is heaviest,” he said.

Dallas/Fort Worth will again be the delivery leader in 2020 with scheduled completions in North Texas totaling about 26,000 units, up 14% from the 2019 volume.

Los Angeles, Washington, DC, and Houston are among other major metros where deliveries will increase the most.


More market update: