DEMAND ( STILL ) DOWN ACROSS PRICE CLASSES , RENT GROWTH MIXED
by Jordan Brooks
Market Analyst | ALN Apartment Data
2022 is shaping up to be another tumultuous year for multifamily performance after the challenge of 2020 and a historic bounceback in 2021 . It was mentioned in the last price class performance article in this space back in the spring that without a recovery in demand , rent growth momentum was unlikely to remain as hot as it had been . In the time since , no demand jump has materialized , and rent growth has cooled despite remaining higher than normal .
Since it has been about six months since the last look , now is a good time to check back in on how the various price classes have weathered the challenges of this year so far across Greater San Antonio .
As a reminder , all numbers will refer to conventional properties of at least 50 units .
Class A
Less than 400 net Class A units have been absorbed through August of this year . Not only was that absorption about 85 % lower than in the same portion of last year , but it was the lowest of the last five years – including 2020 .
Thanks to new supply so far this year being below average , average occupancy has only declined by 0.6 % to close August at slightly above 91 %. Even with this year ’ s slide , average occupancy closed the month higher than in any August of the last five years except for last year .
As a result of previously captured rent growth and shifting demand conditions , Class A average effective rent for new leases rose by approximately 7 % during the first eight months of the year after a 14 % gain in the same period last year . A 7 % gain was obviously well above a typical year and indicates the market is still working to regain an equilibrium , but the increase was also well below that from last year as a sign of progress .
The average Class A unit ended the month leasing for $ 1,630 per month for new residents – about $ 350 more than the same average 24 months ago .
Class B
Class B net absorption fell even more precipitously than in the Class A segment compared to last year . After a 94 % decline , less than 200 net units were absorbed through August of 2022 . For context , in the last five years the lowest net absorption total for Class B through August was a little more than 1,700 units in 2018 .
Average occupancy receded by 0.8 % in the period to close the month at a little below 93 %. As with Class A , despite the backward move , average occupancy remained higher than in any other recent August except last year .
Also as with the Class A subset , rent growth has remained elevated relative to historical norms but has cooled considerably its peak . An 8 % average effective rent gain through August was half of last year ’ s 16 % but almost double the next-highest value from the last handful of years .