US Apartment Demand in 3Q Reaches a Stunning High - Not in the Triad

Posted By: Jon Lowder Blog ,

According to a preliminary report from RealPage apartment demand skyrocketed in the third quarter of 2021, but due to its high occupancy rates the Triad didn't contribute to those numbers. The entire article is worth a read, but here are some highlights:

Preliminary calculations from RealPage, Inc. showed that the nation’s occupied apartment count jumped by 255,094 units during the July to September time frame. That’s the biggest quarterly product absorption figure seen in records that go back to the early 1990s.

The annual demand volume as of 3rd quarter registered at 597,354 units in the preliminary stats. That figure soared beyond the past economic cycle’s peak of some 380,000 units absorbed in the year-ending 3rd quarter 2018. Annual product demand averaged about 250,000 units in 2010 to 2020.

As Greg Willett, the article's author, points out, the demand is being driven by unusually high absorption in gateway metro areas like NYC, LA and DC - those areas don't normally contribute much to the national numbers because product availability tends to be limited. During the pandemic that changed and now they are contributing to the demand. 

Willett also highlights the contributions of new household formation and the continued strength of Sun Belt cities. He also points to several areas where extremely high occupancy levels held back demand and that's where the Triad gets a mention:

It’s worth noting that extremely high apartment occupancy held back apartment demand in some locations during 3rd quarter. There was essentially no more product available to be absorbed in metros like Riverside-San Bernardino, Virginia Beach, Sacramento, Greensboro/Winston-Salem and Memphis.

Finally, Willett addresses the question of whether demand has peaked:

RealPage analysts are anticipating that near-term demand for U.S. apartments will remain well above the historical norm. However, it seems likely that the product absorption volume will ease to some degree from 2021’s high level...

Third, build-to-rent single-family homes could drain off some demand from apartments in the Sun Belt. While build-to-rent single-family home subdivisions form only a very small portion of the total rental stock now, quite a few of these communities are under construction now, mostly in Sun Belt locations where exurban land prices are low enough to make this product work financially.

We’ll have to wait and see how demand sources for this line of product are split among those who previously rented apartments, those who previously rented older single-family product from mostly mom-and-pop landlords, and those who are downsizing from larger single-family homes that they owned.