Southeast Region Multifamily Market Sees Strong Rent Growth in Q2 2018
The Southeast Region of the U.S. has continued to see strong rent growth, with nine of the 12 primary markets experiencing rent increases higher than the national average over the 12 months ending in Q2 2018. Vacancy rates across the region have skewed higher recently, driven by the addition of new supply in the markets.
According to data from Reis, nine of the 12 primary markets in the region posted rental gains higher than the U.S. average of 4.5% over the 12 months ending in Q2 2018. The market with the highest rent growth was Orlando (up 6.9%), where the average asking rent rose to $1,185/unit at the end of the second quarter, up from $1,108/unit one year ago. Orlando is expected to continue to be a strong performer over the long-term, driven by strong demographics behind robust positive net migration and a young working-age population.
Nashville finished with the second highest rent growth in the region, rising 6.5% over the last 12 months (finishing at $1,114/unit, up from $1,046/unit), propelled by a surplus of new Class A product added to the inventory.
Reis data showed that multifamily vacancy in the Southeast Region has skewed higher recently, with nine of the 12 primary markets posting higher vacancy rates than the U.S. average.
The three markets that managed to post vacancy rates lower than the U.S. average of 4.8% at the end of Q2 2018 were: Orlando (rising to 4.7% from 4.3% one year ago), Tampa-St. Petersburg (unchanged at 4.7%), and Jacksonville (improving to 4.4% from 4.7%).
The highest vacancy rates in the Southeast at the mid-year mark were reported in Birmingham and Nashville, both at 7.1%. Vacancy in both markets has been driven by the addition of new supply. Reis data revealed that more than 1,100 new multifamily units were delivered in Birmingham during 2017, representing 2.5% of total inventory and the highest annual total since 2006. In Nashville, nearly 6,600 units were delivered last year, which represented 5.8% of the existing inventory and was the highest annual total on record for the market.
The highest level of multifamily development in the Southeast Region during 2017 was in Atlanta, with a total of 9,000 new units completed. Atlanta finished fourth nationally for the year, behind only the Houston, Dallas, and New York City markets. Reis forecasts more than 27,200 additional units to come online in Atlanta through 2022, the third-highest forecasted total nationally for that time, behind only Dallas and Los Angeles.
According to the U.S. Bureau of Labor Statistics, employment in the South region (combined South Atlantic and East South Central areas) increased 1.6% during the 12 months ending in July 2018, lower than the 2.4% growth rate for the 12 months ending in July 2017, yet in line with the U.S. overall growth rate.
The Orlando-Kissimmee-Sanford, FL metropolitan area had the highest employment growth rate in the region over the last 12 months (3.6%), followed by Raleigh, NC (3.2%) and Jacksonville, FL (3.1%).
The unemployment rate for the South finished at 3.9%, down from 4.2% one year ago, while the labor force participation rate increased 1.3%.