Real Estate

RealPage: Class-C is now the cream of the multifamily crop

It's the underdog story of the decade; Class-C apartments are outperforming Class-B and Class-A in occupancy growth

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.

Class-C can thank good job growth, the overall demand for multifamily and the particularly acute demand for affordable apartments for its upward momentum in the multifamily market.

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.

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