Average Effective Rent and Lease Concessions
The average effective rent for new leases declined by 0.3 % during the third quarter to finish at $ 1,234 per month . The decline was noticeably smaller than last year ’ s 0.7 % retreat during the same quarter .
Nevertheless , average effective rent growth has now declined in the third quarter for two straight years during a time of the year the industry generally sees healthy growth .
Positive rent growth was entirely a feature of the top of the market . Class A properties taken as a group managed a 2.5 % gain in the period and the Class B subset saw a 0.3 % increase . A 1.8 % decline for Class C and a 2.5 % decline for Class D was enough to bring the market-level average into the negative . A silver lining for the Class C group was that the negative rent growth came alongside year-over-year improvement in net absorption . For Class D , rent growth was negative while net absorption significantly underperformed last year .
Unsurprisingly , lease concessions continued to grow in prominence in the third quarter . By the end of September , roughly 45 % of conventional properties were offering a discount for new leases . The average value rose in the period as well and finished at approximately 3.6 weeks off an annual lease .
Takeaways
The third quarter was a struggle for Greater San Antonio multifamily . An unrelenting new construction pipeline was met with faltering apartment demand . That underwater relationship sent market-level average occupancy to a depth not even seen during the Great Recession . As would be expected in such an environment , average effective rent growth declined in the quarter , as both lease concession availability and average value continued to climb .
Unfortunately , the softer part of the calendar now lies ahead . Net absorption may well return to negative territory in the final quarter of 2024 . Both occupancy change and effective rent change are likely to remain below zero even if that possibility is avoided . Next spring appears to be the next opportunity for a marked turnaround . Until then , buckle up .
* Jordan Brooks is a Senior Market Analyst at ALN Apartment Data .
By the end of September , roughly 45 % of conventional properties were offering a discount for new leases . The average value rose in the period as well and finished at approximately 3.6 weeks off an annual lease .
Despite both the availability and average value metrics being higher than even their pandemic-era peaks , distance remains between their current level and their longer-term peaks . For concession availability , the Great Recession period saw values above 70 %. For the average concession value , that same period ’ s maximum value of 7.5 % off an annual lease is much closer to the current 7 % value .
2324 NOVEMBER AUGUST 2024 2023 | WWW | WWW . SAAAONLINE . SAAAONLINE . ORG . ORG