- The percentage of survey respondents who expect apartment starts to accelerate during the next 12 months jumped from 12% in Q4 2023 to 23% in Q1 2024.
- While debt and equity financing for development are still extremely difficult to secure, a handful of survey respondents (4%-5%) signaled that it is getting easier compared to six months ago.
- Competition from new rental supply remained the number one challenge in leasing-up newly completed apartments (59% of respondents), followed by qualifying tenants (34%) and weak demand due to economic conditions (25%). Qualifying tenants increased by 11 percentage points since last quarter, while weak demand fell by 12 points.
- On the acquisitions side, the vast majority of respondents indicated that access to financing was either unchanged or difficult to secure. For equity financing, 3% of investors said it was easier while 6% found debt financing easier to obtain.
- This is the first time since the survey began in Q3 2023 that any respondents thought financing for both development and acquisitions was easier to secure, a sign that market challenges caused by high interest rates may have peaked.
- Nearly 40% of investors indicated they plan to purchase new communities in the next six months, an almost fourfold increase since Q3 2023.
- Almost half (48%) of investors expect prices to grow in the coming year, while a sizeable minority (38%) anticipate declines. The lack of consensus on pricing reflects an ongoing disconnect between buyers and sellers that continues to limit sales activity.
- Higher expense growth was the main driver for investors’ sentiments about apartment price changes, followed by more expensive financing and lower rent growth.
- The outlook for renter demand saw an improvement with the arrival of the busy spring leasing season. Two in five operators expect demand in six months to be better or much better than today, which is nearly double the level from last quarter.
- Bad debt remains a critical issue, driven largely by fraud. The percentage of apartment portfolios more than 30 days delinquent on rent currently averages 5.1% among survey respondents, compared to a normal average of 3.5%.
NAA is pleased to partner with John Burns Research and Consulting on this insightful sentiment survey. To participate in the Q2 2024 survey, reach out to Paula Munger, NAA’s VP of Research, at [email protected].