2Q19 Witten Advisory Excerpt: The favorable overall supply/demand dynamics for the nation carried over to most local markets – with all but 7 reporting leasing rates outstripping net supply. If we went back a year, only 15 metros – rather than 36 – would have reported more demand than supply and thus rising occupancy rates. And we’d have to go back to 2012 to see this many markets on the good side of the line.
In the top right portion of this graph lie the four most active development metros, with each reporting a tremendous demand response. Denver and Austin reported notable bumps in occupancy, which led to increased pricing power in both. In Seattle, demand slightly exceeded supply. Salt Lake City “underperformed” – we had expected demand to exceed supply rather than just match deliveries.
Let’s go from the top right to the bottom left and look at Houston, which saw a scant amount of completions, but demand was barely positive. There has been lots of distortion in the market due to Harvey, but we do expect that aberration will work its way through by later this year.
Other than Houston, the few shortfalls were marginal. Looking at the big increases in occupancy, Norfolk/VA Beach topped all markets with an 80-bp gain, while Las Vegas came in just behind, followed by Austin, DC, San Antonio, and Cincinnati.