Why a diminished supply means fewer concessions

The number of multifamily properties leasing-up in key Sun Belt markets is lower this November than last year, while absorption is high, giving property managers leeway to set higher rents and offer fewer concessions to renters.

Sun Belt, lease-up, Nov 2021

The ripple effect of the COVID-19 pandemic can be seen in the number of properties in lease-up. Using Atlanta as an example, there were 70 new properties open for leasing that were still below 85% capacity in November of 2020. These properties started building months before the pandemic took hold of the country.

During the pandemic, developers became cautious and unsure about what effect it would have on demand, and so stopped building new apartment units as readily. As a result, come November of 2021, there were only 29 properties actively leasing up in Atlanta.

Meanwhile, absorption has seen healthy growth. In November of 2020, properties in lease-up were seeing an average of 13 leases per month get signed. Fast forward to this November, and the average number of leases signed has accelerated to 24.

Put plainly, developers miscalculated in the thick of the pandemic, and now demand is high while supply is thin. Most of these hot multifamily markets experienced this trend – the number of properties in lease up fell from last November to this one, while absorption jumped.

This gives property managers and landlords more power in lease pricing – if we look at Atlanta again, we see that leases offered an average of 11.8% off on leasing costs in November of 2020. This past November, that average lease discount fell slightly to 9.7%.

In other cities the concession percent fell even more drastically – Orlando’s concessions dropped from an average of 12.5% to 8.5% from last year to this year, and Austin’s dropped from 10.9% to 6.7%.

Considering the lack of rental options available to renters in high-growth cities, renters are increasingly open to signing a lease with fewer pricing concessions made to them.

Sun Belt absorption performance 2016-2021