It’s the underdog story of the decade. Class-C is now on top of the multifamily food chain, boasting tighter occupancy rates than Class-B and Class-A, according to a report from RealPage.
At the beginning of the cycle (roughly Q4 2009), Class-C had an occupancy rate of 90.8%, the lowest in 10 years and lagging 200 basis points behind Class-A and Class-B units. By the end of 2015, Class-C was performing at about the same level as the other classes.
Now, in the first six months of 2018, Class-C has outstripped Class-B and Class-A with an occupancy rate of 95.9%, marking the 13th consecutive quarter with an occupancy rate above 95%. To be clear, all classes are performing exceptionally. Class-A registered a 94.8% occupancy rate in Q2 2018, and Class-B put up 95.4%.
The big winners in terms of Class-C activity were Memphis, Orlando, Jacksonville and Atlanta all of which had a positive change of more than 1,000 basis points during this cycle.
Memphis started at 81% occupancy in Q4 2009 and shot all the way up to 93% occupancy by the end of this quarter. That is a 1,200 bps change over just under a decade.
Orlando came in second place putting up 1,190 bps increase from 2009 to 2018, rising from 86.9% occupancy to 98.8% occupancy over the length of the cycle.
This come-from-behind win for Class-C defies typical historical trends for the multifamily market. According to the report, Class-C usually lags behind the pricier multifamily classes.