Rents are likely to rise faster for older, class-B apartments in 2019 than for any other class of apartment property.
“We expect Class-B to continue to have the strongest average rent growth, as it has through recent history,” says Andrew Rybczynski, senior consultant at research firm the CoStar Group.
“While occupancy is sky high in class-C product, rent growth in that sector is beginning to slow a little,” says Ron Willett, chief economist for MPF Research, a RealPage company.
Class-B apartments in the lead
Class-B apartments have generally stayed fully occupied, even in markets where developers have built thousands of more expensive, class-A units. So, rents at class-B communities have moved steadily higher, while many landlords at class-A buildings have had to offer steep discounts.
That’s because class-B apartments are usually priced several hundred dollars lower than new class-A properties. “Class-B benefits from being cheap relative to class-A, while experiencing relatively little supply risk,” says Rybczynski. He predicts rents will rise in the high-2-percent range for class-B apartments in 2019. That similar to the 3.1 percent average growth in 2018.
According to Willett, “Class-B properties should experience the strongest rent growth in 2019, with the expected performance level holding near 2018’s growth rate of 3.5 percent.”