“The demand for apartment housing across our footprint remained strong and shows no signs of moderating.” That is according to Eric Bolton, chairman and CEO of Mid-America Apartment Communities Inc.
According to Bolton, high demand and low resident turnover have supported the company’s ability to capture strong occupancy and positive rent growth despite the high levels of new supply in several of our markets. “On a blended lease-over-lease basis as compared to the prior in place leases, rents grew by 3.1% in the third quarter. This is 60 basis points better than the same time last year.”
As for next year, Bolton expects that strong demand will offer the opportunity for continued positive momentum in rent growth during 2019, despite the new supply headwinds. “As part of our fall budgeting process, we performed a robust and detailed assessment of the new supply outlook across our portfolio. Supplementing the information from third-party research, we do a property-by-property and immediate submarket review to consider specifically how new supply is likely to pressure leasing across our portfolio in the coming year.”
He explained that “our early assessment is that the 2019 new supply pressures at a portfolio level will likely moderate slightly from the volume of new deliveries in 2018 and support continued improved — improvement in new lease rent growth in 2019. We continue to capture good results from the various expense synergies and new initiatives coming out of our merger with Post Properties, primarily in the area of repair and maintenance costs. As we approach the two-year mark since our merger, we do expect that we’ll begin to see some of the initial lift from expense synergies start to moderate on a year-over-year basis, as we move into 2019.”
On the development front, he says the REIT is continuing to find opportunities that will offer attractive and accretive NOI yields. “During the third quarter, we started construction on a Phase II expansion in our Sync36 property in Denver bringing our current development pipeline to $148 million. We currently have additional sites either owned or under contract in Denver, Houston, Fort Worth and Orlando they are currently in pre-development. We hope to get started with these projects at some point during the coming year.”
In addition to this development pipeline, the REIT has another five properties representing over 1,600 units currently under initial leased up in all performing in line with the company’s expectations. “In addition to our new development and lease-up pipelines, we continue to capture strong returns on our redevelopment pipeline with over 6,500 units redeveloped so far this year generating very attractive returns on capital. We have another roughly 20,000 units that we expect to redevelop over the coming two to three years.”