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Expectations for U.S. Apartment Market in 2014
With a 4.1% annual growth rate in GDP for Q3 2013, the past few monthly job creation reports exceeding expectations, and Moody Analytics speculating that preconditions are in place for much stronger economic growth in 2014, the economic outlook for the country as a whole in 2014 is encouraging.
All this is good news for an apartment sector that is expecting a significant amount of new product to hit the market 2014: scheduled deliveries in the nation’s 100 biggest metros climbed to 234,700 units in 2014.
But apartment absorption probably won’t quite keep pace with product additions in 2014, according to MPF Research analysts, who think occupancy will cool mildly to 94.6 percent by the end of the year. The firm forecasts rent growth of 2.6 percent over the coming year, with middle-market product continuing to achieve price increases well above the upturns in the newer, luxury property segment.
Renovations Impact Rent Growth for Middle-Tier Product
Impacting rent growth prospects overall but specifically for the middle of the market is that there is a significant amount of value-add and renovation activities taking place in middle-market communities. Communities with new ownership as well as those whose ownership simply believes that now is the right time for even moderate upgrades are engaging in long-term asset preservation activities.
New Starts Expected to Decline in 2014
While completions will accelerate in 2014, MPF Research anticipates that construction starts will move in the opposite direction. Evidence points to the number of new projects beginning construction in 2014 will drop 10 to 20 percent.
The Bottom Line for 2014
The big-picture story for the current cycle for the apartment market is about the length of the cycle and solid returns over an extended period of time rather than what happens in any individual year.
“We’re in a cycle where performances will remain solid for a long time, though they won’t be at the spectacular levels that were recorded in the early part of the recovery process,” according to Willett. “Overall expectations for investment returns remain attractive with only limited downside risk.”
Carnahan Property Management services Woodland Hills,West Hills, Calabasas, Canoga Park, Tarzana, Reseda,Porter Ranch, Topanga, Encino, Northridge, Van Nuys,North Hills,Chatsworth, Sherman Oaks, Studio City, North Hollywood, West Hollywood, San Fernando Valley, Granada Hills, Mission Hills, Simi Valley, West Lake Village, Agoura,Toluca Lake, Valley Village, Burbank. Call us at (818) 884-1500 and check if we can serve your area.
