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HISTORICAL APARTMENT OCCUPANCY US SOUTH RALEIGH-DURHAM MARKET REPORT RALEIGH-DURHAM www.colliers.com/raleighdurham MARKET INDICATORS Q1 2014 OUTLOOK VACANCY CONCESSIONS RENTS TRANSACTIONS PRICE PER UNIT CAP RATES Q4 2013 | MULTI-FAMILY HISTORICAL APARTMENT RENTS 90% 91% 92% 93% 94% 95% 96% 2011 2012 2013 Source: MPF Research $400 $500 $600 $700 $800 $900 $1,000 $1,100 $1,200 2011 2012 2013 Source: MPF Research US SOUTH RALEIGH-DURHAM Rent Growth Slows Amid New Supply Research Triangle Park (“RTP”) has been a major economic driver in Raleigh-Durham’s growth for years. Accompanied by three large nearby universities, a well-educated labor pool and more than $2 billion invested annually in research and development, RTP is one of the world’s most renowned research and technology parks. Many corporate users continue to have RTP on their shortlist for expansion and relocation possibilities. To foster even more growth and attract residents, Raleigh is in the process of revitalizing the downtown neighborhood to a “lively business-by-day, entertainment by- night venue” concept. The revitalization will bring new retail businesses and new jobs, and as a result, the apartment communities nearby will attract younger renters who prefer an urban lifestyle. Raleigh’s occupancy rates have consistently bounced between 94.5% and 95.5% the past eleven quarters. 2013’s 4th quarter saw occupancy drop 90 basis points to finish off the year at 94.4%; this figure is down 40 basis points on an annual basis and is slightly below the national average of 95.0% but slightly above the regional average of 94.2%. After three consecutive quarters of effective rent growth, the dip in occupancy seems to have reversed this trend as effective rents dropped 1.8% in the 4th quarter. Year over year the metro area experienced 1.8% growth in rents which is well below the 4% annual growth seen in Raleigh over the past 3 years. Owners of 2000 vintage assets or newer increased effective rents by only 40 basis points in 2013 due to struggles with new competition in the market. According to REIS, Raleigh experienced six multifamily sales in the 4th quarter of 2013 totaling $164.2 million at an average price per unit of $104,000. Cap rates for these 6 transactions averaged 6.4%, an expansion of 40 basis points from the 12-month rolling cape rate of 6.0%. There were 15 projects totaling 3,317 market-rate units that completed construction in 2013. According to REIS, 17 projects encompassing 4,370 units are slated for completion in 2014, while another 10 projects encompassing 3,098 units are under construction with no projected completion dates available at this time. Despite the influx of new supply projected in the coming years, demand figures remain strong and should be in-line or even outpace new deliveries to the market. Updated May 2012
