MARKET UPDATE Rent Growth Slowed ( Slightly ) in August
by Jordan Brooks
Market Analyst | ALN Apartment Data , Inc .
Apartment demand and rent growth have rightly garnered much attention this year as the multifamily industry has enjoyed a robust and sustained rebound after a challenging 2020 . Greater San Antonio has been no exception . August marked a fifth straight month of at least 1 % monthly growth in average effective rent . Additionally , each month from February through July saw a larger rent gain than the prior month - with July ’ s 2.5 % gain representing the peak . August finally proved to be the month the end the run after registering an average effective rent gain of 2 %.
Net Absorption
One area of difference between August and recent months was net absorption . After demand was fairly tepid to open 2021 , the switch flipped in April . Just more than 1,500 net units were absorbed in the month which was more than in all of the first quarter combined . The next few months saw even more dazzling demand , with between 1,700 and 2,000 net units absorbed in each of May , June , and July . In August , just less than 1,500 previously unoccupied units were leased .
While nothing to sneeze at by any means , the drawdown in demand compared to the summer months certainly had an impact on effective rent growth . The shortfall in net absorption came from the B , C , and D price classes , with Class A properties continuing their shallow upward trajectory in August . Within those bottom three tiers , the 65 % decline compared to July in the Class C space was the largest drop off . The Class C subset had seen demand trending down for the last handful of months , but August represented the sharpest change in that span .
Lease Concessions
An increase in lease concession availability would be a factor in slowing rent growth , but such an increase did not materialize in August . In fact , a 20 % decrease in availability was the largest monthly decline for Greater San Antonio this year . At the end of the month , only 21 % of conventional properties were offering a discount - well below the 44 % of properties from back in January .
The average concession value also decreased in August , but not by as much as in July . A 5 % reduction brought the average discount to a little under 2.5 weeks off an annual lease , compared to a 12 % decrease in the average value during July . Class A properties played a part in that change , with a 4 % increase during August . The Downtown – Riverwalk submarket also bucked the trend of declining concessions value with a 30 % monthly increase to just under 3.5 weeks off an annual lease .