While much attention has been paid to the recent numbers related to homebuilding starts in the U.S., the rise in apartment occupancy may have been overlooked. Although both investors and the construction marketplace as a whole have focused more on the building of single-family homes in recent months, individual dwelling units have hit the highest level of occupancy in six years, according to statistics from apartment data company Axiometrics and reported by CNBC. In all, 95 percent of such units were occupied in May. Home and apartment occupancy numbers are more resilient than some economic measures, but this increase in the number of people living in apartments is an indicator of financial recovery.
The drop in available apartment space occurred despite increased construction of such units, according to CNBC. This is good news for both builders and those looking for a place to live, as the number of available units is rising but they're also being filled relatively quickly. More serious shortages may occur at the end of 2014 and into 2015. One group that likely isn't happy with this news is investors, as many backed out of trusts involving apartment units in 2013 to put money into what was expected to be a thriving single-family home market. While houses have shown good growth as well, apartment construction and leasing is suggesting this component of the living space market is far from stagnant.
Effective Rent Rate Also Rises
Although serious issues haven't yet been encountered with demand outstripping supply, the apartment market is definitely starting to favor landlords. The Sarasota Herald-Tribune reported the national effective rent, which takes into account incentives and empty units as well as month-to-month payments, rose 3.7 percent from May 2013 to the same month this year. There was wide variation in the effective rent rate between different metropolitan areas. Of the top 25, the Odessa, Texas, metro area, an oil-rich region known for being the source of popular book and television series Friday Night Lights, led the nation with an annual growth rate of 13.24 percent. The tourist destination of Fort Lauderdale, Florida, rounded out the 25 biggest gainers with an increase rate of 5.51 percent.
The significantly increased rate of apartment occupancy will likely lead to increased opportunities for construction jobs related to building these structures. Contractors should be prepared to take advantage of the situation.