Published on Monday, May 6, 2024
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The average lease-up is executing 10% fewer leases than last year despite a 20% increase in overall absorption.
Despite today’s favorable supply-demand dynamics, apartment operators are sensing that “demand doesn’t feel strong,” according to a new report from RealPage.
“There is a disconnect between these market-level figures and property-level figures,” according to RealPage analyst Kim O’Brien.
“As supply levels continue to rise, so has competition. Thus, the amount of leases filtering to each property is below what you’d expect.”
It’s also contributing to less rent growth, O’Brien writes.
New apartment supply is at record volumes, giving the average US renter more options, creating more competition and slightly higher concessions.
“As lease-up properties become more competitive, it’s not a huge leap to imagine someone choosing a lease-up unit over their current Class A property,” according to O’Brien.
RealPage finds that among these assets going through the initial lease-up phase, about 20% more units (40,000) were absorbed in Q1 2024 than the previous first quarter.
Furthermore, the average lease-up community is executing about 10 to 11 leases per month – a 10% decline from last year, despite a 20% increase in overall absorption.
RealPage also finds a shrinking delta between Class A rents and lease-up rents.
“Because of that, there’s only two months’ worth of concessions difference between a Class A asset and a lease-up property,” according to the report.