Five Takeaways from NAA’s Income & Expenses Report

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The National Apartment Association’s Income & Expenses Report for 2019 reveals rising NOIs, as well as rising operating expenses.

The National Apartment Association (NAA) just released its Income & Expenses Report for 2019. Here are the key findings from NAA’s research, which was based on financial statements for the year 2018.

  1. Net operating income (NOI) at the surveyed communities increased by 5.1 percent.
  2. Total revenue went up by 6.8 percent during the year, with the largest increase in revenue coming from higher parking fees. Both revenue lost to “bad debt” and revenue lost to vacancy declined this year.
  3. The average turnover rate for apartments rose to 51 percent from 48 percent in 2017. The increase came after two years of declines in apartment turnover rates.
  4. Operating expenses rose by 9.8 percent, the highest level recorded during this market cycle, according to NAA. Property taxes, as well as a labor shortage and wage growth in the industry, were largely responsible for this increase. NAA estimates that property taxes accounted for 40 percent of expenses at mid-rise and high-rise apartment buildings and for 32 percent of expenses at garden-style apartment complexes last year—more than any other expense category. The cost of salaries and personnel took up 25 percent of expenses at garden-style apartment complexes and 21 percent of expenses at mid-rise and high-rise buildings. 
  5. Capital expenditures—expenses related to renovation and redevelopment of units—declined to below 10 percent.

The annual survey was conducted and tabulated by CEL & Associates Inc. It included 3,698 stabilized apartment properties with 50 units or more, including 3,205 market-rate properties and 493 subsidized properties.

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