The increasing number of apartments built in the Triangle is starting to put a dent into the region’s rising rents.
The Triangle, which has seen thousands of jobs created in Durham and Raleigh in the past decade, has seen some of the most intense construction of new apartment buildings in the U.S., according to a new report from real estate data and property management firm RealPage.
The Triangle — which for this report included Wake, Durham, Orange, Chatham and Johnston counties — has the sixth-highest percentage increase in apartment units in the country.
The number of apartments in the Triangle have increased by 25.1 percent (or 31,890 apartments) over the past eight years. The area trails only Charlotte, Austin, Nashville, Salt Lake City and San Antonio.
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And while many of the apartment complexes are having no trouble finding tenants because of the area’s strong economy, the increased competition is keeping rents from growing faster than the national average, said Greg Willett, chief economist for RealPage. The current occupancy rate across the Triangle stands at 94.4 percent.
Annual rent growth in the Triangle is now clocking in at 2.2 percent, a rate that has slowed from 4 to 5 percent in 2014-2015. The norm for the U.S., in comparison, is around 2.5 percent.
How that translates to local renters is a smaller increase in rent when renewing a lease or generous concessions — discounts offered by apartments — to sign a new lease. Throughout the Triangle you can now find newer apartments offering deals to renters.
For example, at the Bullhouse apartments in downtown Durham — which was only 43 percent full when it sold in June, according to Colliers International — you can get one month of free rent. Bell West End, another apartment in Durham, is offering up to two months’ free rent, and, in Raleigh, the Link Apartments in Glenwood South is dangling one month free rent and an extra $500 to potential renters.
But not every market that has built at such a high clip has seen its rental prices dip below the national average.
Charlotte, which saw the largest growth in its inventory of apartment units since 2010, is still seeing its rents grow faster than the national average, the Charlotte Observer reported.
“Charlotte rents are climbing a little faster than the U.S. norm of 2.5 percent, and property owners and operators in Charlotte still have more pricing power than is typical in more other metros where new supply is coming on stream most rapidly,” Jay Parsons, a vice president at RealPage, told the Observer.
And while the Triangle has added impressive number of apartment units since 2010, the area started out with a smaller inventory relative to other markets that it finished above in the study. For example, the Dallas area added nearly 105,000 new apartments over the same time period, but because it was building from a larger base of existing apartments its percentage growth was below the Triangle.
What parts of the Triangle are seeing that growth?
The average rent for the entire Triangle is now $1,090 per month, though the newest apartments available average around $1,375 per month.
At the center of of the apartment boom are the central Raleigh and North Cary/Morrisville submarkets, according to the RealPage analysis.
Central Raleigh, which includes downtown, accounted for 20 percent of the new supply since 2010 and North Cary/Morrisville, an adjacent submarket, made up 16 percent of the new construction.
But both of those submarkets — which have seen large complexes like The Dillon in downtown Raleigh open — are now seeing less than 2 percent annual rent growth.
The areas where rents are increasing the fastest are also the areas that have some of the cheapest rents in the Triangle.
The average rent in East Durham is now $977, according to RealPage, which would make it the cheapest area it tracks in the Triangle. But that submarket also now has the fastest rate of annual rent growth in the Triangle, expanding at a rate of 4.5 percent, according to the study.
Close behind in rent growth is Southeast Raleigh — where average rent is now $1,020 per month — where rent increased 4.3 percent over the past year, according to RealPage.
The rate of construction doesn’t appear to be slowing down yet even as land prices and construction costs continue to rise.
“There’s still quite a bit of activity ahead for Raleigh-Durham,” Willett said. “Another 4,123 apartments are under construction, and those additions will grow the stock by 2.6 percent over the next year and a half or so.”
Of course, if Apple or even Amazon decide to locate in the area all those apartments and more will be needed to keep rents stable. The N&O reported in June that a study from Zillow said landing Amazon would result in a 1.9 percent increase in rents in the Raleigh market.
|Apartment Inventory Growth Leaders Since 2010|
|Rank||Market||Inventory Growth||Units Completed|
|2||Austin-Round Rock, Tex.||29.2 percent||54,078|
|3||Nashville-Davidson-Murfreesboro-Franklin, Tenn.||28.3 percent||32,382|
|4||Salt Lake City-Ogden-Clearfield, Utah||26 percent||21,773|
|5||San Antonio-New Braunfels, Tex.||25.3 percent||40,450|
|7||Dallas-Plano-Irving, Tex.||21.6 percent||104,725|
|8||Seattle-Bellevue-Everett, Wash.||21.3 percent||58,677|
|9||Denver-Aurora-Lakewood, Colo.||20 percent||47,912|
|10||Houston-The Woodlands-Sugar Land, Tex.||17.3 percent||100,726|