Second quarter data strengthens the industry narrative of a growing recovery across almost all asset types.

“There’s mounting evidence across property types⁠—certainly multifamily⁠—that concessions have burned off and are no longer available for most deals,” Allen Benson said. “Six to nine months ago, renters expected one or more months off a typical 12-month lease; those days are gone.” 

For example, the much-expected multifamily turnaround is officially here, with asking and effective rents both turning positive in Q2 and the vacancy rate staying flat at 5.3%.

Moody’s Analytics REIS says its updated forecasts are revised toward ‘the slightly more optimistic’ and suggests asking and effective rents rising by 2.3% and 2.4%, respectively, this year. The firm also suggests that negotiating leverage has shifted back to landlords.

Double-digit rent increases in the sector are not uncommon, and anecdotal evidence also suggests bidding wars are back in a big way. Recent Moody’s construction data shows that 200,000 apartment units will come online this year in the firm’s top 50 markets; Yardi Matrix data has that number pegged at closer to 330,000 nationally. The firm also suggests that the effect of expiring eviction moratoria will likely not acutely impact larger multifamily buildings, though some metro areas may fare worse than others.

Meanwhile, the office sector is showing mixed results for Q2, with vacancies up by 30 basis points to 18.5% at the end of the quarter. National vacancies are up by 150 basis points when compared to end-of-year data for 2019, pre-pandemic.  Asking rents stayed flat and effective rents fell by .3% nationally, and Moody’s predicts rent growth will remain negative for the rest of this year.

“These 2021 projections also represent lower severities, relative to our forecasts from one to five quarters prior,” the report notes. “While we are expecting vacancies to rise to 19.3% by later this year, remaining elevated throughout 2023, this is also short of the 19.7% all-time high from 1991… we are not predicting the death of office space–but it is likely that this property type will go through a relatively challenging period over the next couple of years.”

Retail is undergoing somewhat of a reprieve, with the national vacancy rate for neighborhood and community shopping centers declining by 10 basis points in Q2 to end the period at 10.5%. Asking rents remained flat and effective rents rose by 0.1%. Mall vacancies are at a record high of 11.5%, but asking rents also rose by 0.2% in Q2. Moody’s analysts say they expect vacancies to peak at 11.5% and that they will likely remain elevated through 2023.

“However, much like the office sector, the worst of our negative rent growth forecasts will likely not come to pass–given how benign rent declines have generally been, and given brightening economic prospects,” the report notes.

Unsurprisingly, industrial was also a top performer in the quarter, with Moody’s ranking it among the most optimistic of the firm’s projections for the year. And the hotel sector is also bouncing back faster than expected, with the occupancy rate crossing the 60% threshold in Q2. Average daily rates also increased by 23%, and Moody’s says the sector could hit pre-COVID ADR levels as soon as next quarter. Revenues per available room also increased by 42.9%.