Whereas significant new supply was more of the same relative to earlier in the year , apartment demand did see more of a change in the third quarter . After net absorption of only around 200 units in the second quarter , more than 1,100 net units were absorbed from July through September . With yearto-date absorption of just under 1,200 units total , third quarter demand accounted for nearly all of net absorbed units in 2023 . Despite the improvement from earlier the year , and the fact that the period outperformed the same portion of 2022 , third quarter demand was still lower than in any other recent year .
The improvement that did materialize was largely concentrated at the top of the market . Around 650 net units were absorbed in each of the Class A and Class B subsets . For Class C , a net loss of a little more than 200 leased units represented a measure of improvement from a net loss of nearly 700 leased units in the same portion of 2022 . For the Class D group , a net loss of less than 10 leased units was the first time in the last five years that third quarter net absorption was negative .
Average Effective Rent and Lease Concessions
For the second consecutive quarter , and the third quarter of the last four , average effective rent growth for new leases was negative in the period . A decline of 0.7 % was the largest quarterly decline since the final quarter of 2019 . After the first quarter saw average effective rent remain virtually unchanged , and the second quarter brought a slight decline of less than 0.5 %, the third quarter was the first in 2023 to bring notable change .
As would be expected given the environment , lease concessions continued to play a growing role during the third quarter . A double-digit increase in availability meant that one-third of conventional properties across Greater San Antonio ended September offering a discount for new leases . An increase in the average concession value in the period brought the average discount to three weeks off an annual lease . The average discount value closed September at its highest point since September of 2020 .
Takeaways
Another quarter is in the books and 2023 is quickly approaching its finish line . New supply remains a headwind , with deliveries rolling along at a blistering pace . A significant improvement in demand from the basement levels of earlier this year was a welcome sight but was not enough to avoid a further average occupancy decline . After managing to hold steady through much of the year , average effective rent growth for new leases finally gave way in the period to the tune of a nearly 1 % decline . The continued move on the part of operators toward lease concessions in an effort to boost demand and occupancy certainly played a role .
Macroeconomic headwinds , geopolitical uncertainty , and seasonal trends all point to a fourth quarter that is likely to be a challenge . * Jordan Brooks is a Senior Market Analyst at ALN Apartment Data .
The losses were largest in the workforce housing segments . Class C experienced a decline in average effective rent of around 1.5 %, and Class D suffered a loss of nearly 2 %. In the top two price tiers , Class B saw a loss of 0.1 % in the period and the Class A group led the way with a 0.1 % gain . In the same portion of last year , rent growth for all four price classes was still in positive territory as the incredible run during the 2021 and 2022 period was beginning to draw to a close .
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