Sales volumes for multifamily properties in the U.S. jumped 47 percent during the third quarter after a relatively slow second quarter, led by activity in western markets.
Third quarter, national sales volumes for multifamily property reached $25 billion, according to Jones Lang LaSalle.
"Several factors -- such as the 'housing hangover,' the rise in household formation and population growth within two key renter demographics (Echo Boomers and empty nesters) -- continue to support robust demand for rental apartments," Brady Titcomb, research manager, multifamily, for JLL, said in the report.
The growth in sales was driven by apartment sectors in tech-heavy areas in the West, JLL found.
"While all metros have seen apartment fundamentals strengthen over the past year, some of the highest levels of growth have been found in economically diverse areas that feature a high concentration of STEM [science, technology, engineering and math] employment, such as Seattle and Portland, Oregon," said David Young, managing director and leader of JLL's west coast multifamily practice, said.
The top-ranked metro areas are Washington D.C., New York and Los Angeles, where $5.8 billion in year-to-date multifamily sales were reported.
The firm expects strong multifamily absorption levels across the U.S. into 2017.
Snapshot of the multifamily markets in seven of the major Western metro areas:
Denver: Denver ranks within the top 10 in the country based on annual rent growth. Over the last three years, Denver has absorbed 4,100 units annually, on a net basis. To date, 4,398 units were delivered and absorption has totaled 4,259 units. With $1.5 billion in year-to-date transactions, sales volumes are down 6.9 percent over last year's needle moving pace, the MSA's solid fundamentals continue to keep the investment landscape competitive and velocity moving toward peak levels.
Los Angeles: Los Angeles has the highest rate of renters versus owners of any U.S. metro. At 3.9 percent over the past year, Los Angeles' rent growth falls in-line with the U.S. average; however, core assets still garner annual growth above 5 percent. During the past 12 months, nearly 3,000 units were delivered, nearly 6,000 units were absorbed, and occupancy increased 40 basis points.
Orange County, California: Market vacancy is 3.6 percent, its lowest level since 2000, and the average rent has grown by 4.3 percent over the past year. Investor demand for multifamily assets in Orange County remains strong, as nearly $900 million in transactions have been completed during the past year.
Phoenix: Renter demand is tight throughout Phoenix, and the vacancy rate is at a historic low of 5.5 percent. Rent growth has accelerated in 2013 and averages 4.5 percent on a year-over-year basis. Approximately 4,700 units, or 1.9 percent of the total inventory, are under construction. Investment sales activity has been robust, with $2.4 billion in multifamily transactions taking place over the past year.
Portland: At 41.7 percent, Portland has a very high percentage of renters compared to the national average. The vacancy rate is 2.9 percent, its lowest level since the mid-1990s. While year-to-date investment sales volume was down 19.4 percent through the third quarter, the volume remains right at its 10-year average.
San Diego: During the past year, new deliveries have increased inventory by 20 basis points, but occupancy has increased by 60 basis points to reach 97.7 percent. Year-over-year, the average rent has increased by 2.7 percent. Investors continue to covet apartment communities in this metro, as the investment sales volume was up 21.1 percent from 2012 through the first three quarters.
Seattle: At 6.2 percent, Seattle's annual rent growth is the highest in the country. Investment sales volume reached $1.8 billion in the first nine months of 2013, a 12.8 percent increase from the same period last year.