Apartment renters aren't moving much
Great article from USA Today on the trend towards higher-than-average apartment rent renewals. Given the cost and inconvenience of moving, we would expect most tenants to renew if they are happy with their current living arrangement.
What I find interesting, however, is that this is occurring despite the large number of newly constructed units coming online. That means that the new construction is being absorbed by new tenants - not simply by attracting tenants from one building to move to another.
So, the trend of new renters entering the market place seems to be strengthening - which means the new supply will be absorbed without a hit to the renewal rate amongst existing complexes.
I also like the mention about the high occupancy rate and lack of viable alternatives for the lower-priced rentals that PGP tends to acquire. The new supply being built in this category is virtually nil.
From the article:
Apartment dwellers are staying put in record numbers, a brand of loyalty that’s helping drive up rents.
The share of renters opting to renew their leases hit an all-time high of 53.8% through the first seven months of the year, up from 52.9% in 2015, according to new data from property management software provider RealPage.
A more typical 45% of renters renewed their leases annually in the mid-2000’s, a share that roughly held steady through the recession as job losses forced many to downsize or move in with relatives, says RealPage Chief Economist Greg Willett.
At the same time, renters looking to move to other low- or mid-priced apartments have few choices, Willett says. The occupancy rate is 96.4% for low-priced units and 96.2% for mid-priced dwellings, according to RealPage.
“You’re unlikely to relocate if it’s a big struggle to find a vacant apartment in your preferred neighborhood at the price point you can afford,” Willett says.
By contrast, occupancy is 94.9% for expensive apartments. That’s largely because apartment developers are overwhelmingly putting up luxury buildings, many in or near central business districts to accommodate the Millennials and others who prefer to live there. Willett says land is so pricey in those areas that more affordable apartment complexes would not be profitable in many cases.