NOI/Unit Rent Development of 5.3% Continues Four-Year Trend, Rent Growth Expected to Slow as New Deliveries Peak
House revenues continued their string of strong performances in 2015, inning accordance with the latest full-year financial information gathered on hundreds of thousands of multifamily systems.
The combined 2016 net operating income at 4,362 traditional multifamily complexes reporting year-end numbers amounted to $5.2 billion, according to Fannie Mae and Freddie Mac mortgage-back securities information collected through March and examined by CoStar Group.
Those apartment or condo homes contained about 750,000 systems– as a result representing NOI per unit of $6,942. That NOI/unit represented a 5.3% year-over-year development rate in 2016, up a little from the 5.2% yearly average rent increase in 2015 for the very same homes.
The 2016 increase exceeded development in 2015 in addition to the boosts seen in 2014 and 2013 of 4.1% and 5%, respectively.
CoStar analyzed property-level information on collateral backing loans securitized by Freddie Mac and Fannie Mae. Considering that traditional multifamily homes make up the bulk of that security, trainee, senior and manufactured housing homes were excluded from this analysis.Priciest Properties Lead Lease Increase The year-over-year boost in
apartment rents continues to be a top-down phenomenon. For the most pricey multifamily residential or commercial properties, those reporting 2016 NOI/unit of$ 10,000 or more (about 118,850 units), the yearly NOI boost came in at approximately 6.15%, inning accordance with CoStar’s analysis. In homes where the 2016 NOI/unit was
between$ 5,000 and$ 10,000 (about 354,500 units), the yearly NOI increase came in at an average of 5.74%. In residential or commercial properties where the 2016 NOI/unit
was less than$ 5,000( about 276,200 systems), the annual NOI increase can be found in at just 2.83% over 2015. That is below the 4.4% average development rate seen from 2014 to 2015. Those numbers are also reflected in 2 states, Texas and California, each of
which had unit totals of more than 100,000 in the examined data( 146,582 and 109,745 respectively). Apartment or condo units in Texas balanced NOI in 2015 of$ 5,277 and posted NOI development of 3.4% in 2016. The units in California had an average NOI of $10,870 and published NOI development of 7.9%. By size and appraised worth, nevertheless, the largest apartment or condo residential or commercial properties( those with 500 units on average and valued at$ 64 million or more )published the lowest increase in NOI of simply 4.52 %– similar to their growth rate in 2015. The average yearly physical tenancy for the reporting residential or commercial properties was up somewhat at 94.53% from 94.3% for both 2015 and 2014. Fannie and Freddie Forecasting Steady Multifamily Market in 2017 In general, Fannie Mae expects the multifamily market to remain relatively steady in
2017 even with a rise of brand-new supply coming online this year.
CoStar is tracking approximately 500,000 brand-new units anticipated to be provided over the next two years.” We expect the national job rate to increase a bit. And we must see some slowing down in lease development, “stated Tanya Zahalak, senior multifamily financial expert, Fannie Mae.
Fannie Mae stated much of the new home supply is concentrated in just 12 metro areas, and the majority of the new supply consists of higher-priced Class An units, according to
Zahalak, where NOI growth has actually been the greatest. Steve Guggenmos, Freddie Mac multifamily vice president of research and modeling, reported that the multifamily market is poised for growth and record origination volumes in 2017, thanks largely to a
strong labor market, need from new household formations, and consistent absorption rates.” A moderate increase in interest rates alone will not be enough to trigger any significant disturbance to the multifamily financial investment market, “Guggenmos forecasts. Nevertheless, relying on how high rates of interest rise during the year, Freddie Mac
expects the nationally aggregated cap rate to range from 5.8% to 6%. This will add to a reduction in the rate of residential or commercial property rate growth nationally
from near 13% in 2015 to a variety of 2.9% to 4.5% in 2017. By contrast, the average yearly development rate seen in the post-recession years was 14%.