Understanding Lease Agreements

Here's something widely misunderstood outside the rental housing industry: There are many flavors of rent. We are reminded of this every quarter during REIT earnings call seasons when some analysts start comparing REITs' rents versus broader datasets. Apples and oranges. ASKING RENTS Most research shops and nearly all headlines report on ASKING RENTS. This is what a prospective renter would pay should they sign a lease at a given point in time. The next-level version of asking rent is the EFFECTIVE ASKING RENT, which factors in the impact of a concession. For example, if a property is offering one month free on a $1,500 asking rent, the effective rent is $1,375. This is how the outside world measures performance of the market. And it's ONLY for a prospective new renter. It doesn't reflect renewals, which are usually priced below new leases. TRADE OUT But that's now how rental housing providers (whether multifamily or single-family rental) measure their own internal performance on rent movement. Why? Because you can ASK for whatever rent you want, but that doesn't mean anyone will pay it. So if you asked for a 2% increase over the prior month but you signed zero leases, then you didn't actually achieve any rent growth... even if data providers and headlines say you did. Additionally, when we compare asking rent change from one period to another, the numbers can be impacted by the composition of what was available in one period versus the prior (i.e. more 3-beds vs. studios). So housing providers internally measure what is called "trade out" or "replacement rents" or "lease-over-lease." Whatever naming, it's the same thing: What is the new rent compared to the prior rent paid for the same unit? For new leases, you look at what the new resident is paying per month compared to the prior resident of the same unit. For renewals, you look at what someone is paying to stay put in the same unit. Then the combined weighted average of new and renewal lease rate change = "blended" rate growth or combined trade-out. And that is what the REITs (and private sector owners, too) report on -- not asking rent change. WHY IS IT IMPORTANT? As this chart illustrates, asking rents and trade-out generally follow similar trends, but they can divert during inflection points-- like 2021 (when asking rents topped actual trade-out) and again now. Here's what is happening in 2023: Because many operators did not "mark to market" renewal leases when rents soared in 2021 and early 2022, there are still many current residents paying well below market. But turnover is picking up this year with so much new supply in the market, and as renters move out, those units get priced to the market. Which puts "blended rate growth" above asking rent growth. It DOES NOT mean those renters are paying more, as the nominal rent may still be below the asking rent in many cases. But you can't sustain trade-out growth without asking rent growth.

One of the most fascinating trends in the market right now is not only how impactful lease-up properties have been relative to each other, but also how impactful lease-ups have been on existing product. So much so in fact that effective lease-up rents have actually dipped 𝐛𝐞𝐥𝐨𝐰 effective rents among existing Class A properties too. And here's something perhaps even more interesting: 𝘦𝘷𝘦𝘯 𝘭𝘦𝘢𝘴𝘦-𝘶𝘱 𝘢𝘴𝘬𝘪𝘯𝘨 𝘳𝘦𝘯𝘵𝘴 𝘩𝘢𝘷𝘦 𝘥𝘪𝘱𝘱𝘦𝘥 𝘣𝘦𝘭𝘰𝘸 𝘴𝘵𝘢𝘣𝘪𝘭𝘪𝘻𝘦𝘥 𝘊𝘭𝘢𝘴𝘴 𝘈 𝘳𝘦𝘯𝘵𝘴. This is one of the best examples I can think of that highlights how supply does (perhaps paradoxically) lend a direct hand to affordability. Prior to today's big supply wave, lease-up effective rents and stabilized Class A rents were generally pretty close to one another. That was achieved via concessions whereby the typical lease-up was offering a month or so free. In 2019 for example, lease-up asking rents were $2,000 a month and effective rents were $1,870 a month. The math works out to an average concession of about 6.5% (so largely one month free with a handful of properties closer to stabilization that may have pulled back a bit lower than that level). But this chart shows that at the end of 2022 (not coincidentally the starting point of today's big runup in new deliveries), lease-up effective rents began to dip below that of stabilized Class A. And the gap has only widened in the past few months. Today, the average lease-up effective rent is now nearly $300 less per month than stabilized Class A - a hefty 12% discount. That's partially achieved via concessions. More and more lease-ups today are offering more than a month free. But it's also because the asking rent among these lease-up assets has pulled back too. Austin and Tampa are maybe the best examples of where lease-ups are deeply discounted compared to existing Class A. In those markets, 𝒕𝒉𝒆 𝒂𝒗𝒆𝒓𝒂𝒈𝒆 𝒍𝒆𝒂𝒔𝒆-𝒖𝒑'𝒔 𝒆𝒇𝒇𝒆𝒄𝒕𝒊𝒗𝒆 𝒓𝒆𝒏𝒕 𝒊𝒔 20% 𝒃𝒆𝒍𝒐𝒘 𝒕𝒉𝒆 𝒆𝒙𝒊𝒔𝒕𝒊𝒏𝒈 𝑪𝒍𝒂𝒔𝒔 𝑨 𝒎𝒂𝒓𝒌𝒆𝒕. It doesn't take a lot of critical thinking to see how supply is impacting local market trends. You can even find a handful of markets 𝘸𝘩𝘦𝘳𝘦 𝘦𝘧𝘧𝘦𝘤𝘵𝘪𝘷𝘦 𝘭𝘦𝘢𝘴𝘦-𝘶𝘱 𝘳𝘦𝘯𝘵𝘴 𝘢𝘳𝘦 𝘸𝘪𝘵𝘩𝘪𝘯 𝘴𝘵𝘳𝘪𝘬𝘪𝘯𝘨 𝘥𝘪𝘴𝘵𝘢𝘯𝘤𝘦 𝘰𝘧 𝘴𝘵𝘢𝘣𝘪𝘭𝘪𝘻𝘦𝘥 𝘊𝘭𝘢𝘴𝘴 𝘉 𝘳𝘦𝘯𝘵𝘴. Many of the markets that fit this profile are high supply southeastern U.S. markets (Orlando, Lakeland, Cape Coral/Ft. Myers, Myrtle Beach, Asheville, etc.) But also, some coastal and coastal-like markets where concession burnoff factors into short-term asset management strategies (e.g. San Francisco, Oakland, Denver, and Boston for the time being) where Class B rents are ≤10% of lease-ups.

Private landlord sales running at twice the market average in London as low yields and higher mortgage rates hit refinancing and some seek to crystallise large capital gains ahead of possible tax changes to #CGT. We track how many homes for sale on Zoopla (part of Houseful) were previously rented. Its been steady at c1 in 10 for the last 2 years. 40% of these homes stay in the rental market with the remainder returning to home ownership. The geographic focus of disposals is concentrated in London which accounts for 2 in 5 landlord sales. London accounts for 1 in 5 private rented homes so landlords are selling at twice the market average. Analysis for the Financial Times this weekend shows disposals are in line with the share of private rented housing across the rest of southern England and below average across the rest of Great Britain. This trend is a combination of 1) the changing economics of buy to let with a mortgage and 2) the scale of uncrystallised capital gains for long term landlords. Higher mortgage rates and bank lending rules mean that a higher rate taxpayer cannot borrow more than 50% of the value of a buy to let property in London. Across the rest of the UK, where gross yields are higher, the impact of higher mortgage rates on refinancing costs is lower and 70% LTV is often still attainable. Still, we estimate 40% of landlords have no mortgage at all and a further 30% have low LTV loans of sub 50%. Stalling house price inflation in London - the average value of a flat is pretty much the same today as it was in 2016 - is also a key factor here and landlords may be taking capital gains now for re-investment. Long term landlords are sitting on some of the biggest capital gains and the prospect of further changes to taxation may see more disposals this autumn. This will keep the rental 'supply side' under pressure in London although more new homes sales to corporate investors is growing supply. We will have to see what actually appears in the autumn #budget but further tweaks to taxation that impact landlords and longer term requirements to improve energy efficiency will continue to influence decisions and support the ongoing rationalisation of the private rented sector. #PRS #BTL #mortgage #housing #renting #BTR #multifamily

The Yardi March 2026 Multifamily report is here. 5 observations worth noting: --- 1. Weakest YoY March Growth on Record The average U.S. advertised rent rose $5 in March to $1,750, the first increase since last summer. Spring leasing season has arrived, and the gains were broadly distributed. But the 0.1% year-over-year growth rate is the weakest March on record going back to 2012. For context, the 2012-2019 average March growth was 3.6%. 2. Low Supply = Positive Rent Growth The pattern continues to hold. New York City (+4.5%), San Francisco (+3.9%), Chicago (+3.4%), Twin Cities (+2.5%), and Kansas City (+2.3%) are leading the way. Every one of these markets has trailing-12-month completions below 2.5% of total stock. Detroit (+1.4%) is worth watching too, with only 0.8% completions-to-stock, the lowest in the top 30. 3. High Supply = Negative Rent Growth Austin (-4.1%), Denver (-3.5%), Tampa (-3.4%), and Phoenix (-3.2%) remain the weakest markets. Austin's completions-to-stock ratio sits at 7.8%, nearly 3x the national average. Charlotte is absorbing 6.5% of stock in new supply, which explains the -1.4% YoY rent decline despite strong 2.7% job growth. Supply is the dominant variable. Takeaway: Watch Charlotte. Strong jobs + massive supply = a market that could swing quickly once the new supply pipeline clears. 4. Occupancy Softening Across the Board The national occupancy rate held at 94.3% but declined 40 bps year-over-year. Only two markets posted occupancy gains: Atlanta and San Francisco (both +0.2%). Tampa saw the largest drop (-1.1%), followed by Washington, D.C., and Houston (both -0.9%). Texas markets are especially soft, with Houston at 91.8% and Austin at 92.0%. Meanwhile, New York sits at 98.2% and New Jersey at 96.7%. The spread between the best and worst markets is now 5-6%. Takeaway: Continue to protect the back door. Renewals matter more than ever in a market where occupancy is eroding. 5. Iran Conflict, Energy Prices & AI Reshaping Growth This month's editorial section is stacked. Iran's blockade of the Strait of Hormuz is disrupting global supply chains and pushing energy costs higher, creating inflation risk and a "higher-for-longer" rate environment. At the same time, AI now represents one-third of corporate capital expenditures and the share is rising. J.P. Morgan's Tom Kennedy predicts U.S. economic growth will be driven by AI spending rather than consumers. Add in a K-shaped economy with spending concentrated in the top third of earners, reduced immigration, and a declining birth rate, and the demand picture for multifamily gets more complicated by the month. Anything here stand out or surprise you? How do you expect the Spring/Summer to unfold? - Trey (p.s. access to this report linked below) *** Follow me (Trey Wheeler) for more Multifamily content & sign up for my free newsletter below to receive it every Saturday.

𝗧𝗵𝗲 𝗱𝗮𝘁𝗮 𝗹𝗮𝗻𝗱𝗲𝗱. 𝗔𝗹𝗹 𝗼𝗳 𝗶𝘁. 𝗔𝘁 𝗼𝗻𝗰𝗲. Rental, sales, and hotel occupancy all printed their first declines of the cycle in the same data window. If you are building a mid-year forecast, March redraws the baseline. Weekly READ: Real Estate Analysis in Dubai (April 12 - 18, 2026). → 𝗜𝗠𝗙 𝗗𝗼𝘄𝗻𝗴𝗿𝗮𝗱𝗲 → 𝗛𝗼𝘁𝗲𝗹 𝗘𝘂𝗽𝗵𝗲𝗺𝗶𝘀𝗺𝘀 → 𝗥𝗲𝗻𝘁𝗮𝗹 𝗖𝗼𝗹𝗹𝗮𝗽𝘀𝗲 → 𝗕𝘂𝘆𝗲𝗿𝘀' 𝗣𝗵𝗮𝘀𝗲 → 𝗦𝗰𝗵𝗼𝗼𝗹𝘀 𝗥𝗲𝘁𝘂𝗿𝗻 1️⃣ 𝗜𝗠𝗙 𝗖𝘂𝘁𝘀 𝗚𝗹𝗼𝗯𝗮𝗹 𝗚𝗿𝗼𝘄𝘁𝗵 𝘁𝗼 𝟯.𝟭% The April WEO revised 2026 global growth to 3.1%. The conflict accounts for the full revision. ↳ UAE at 3.1% for 2026 (down from 5.0%), with 5.3% projected for 2027. ↳ Middle East and Central Asia cut to 1.9%, nearly three points below January. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: At 3.1%, hiring holds. Below 2%, the rental default pattern already forming accelerates. 2️⃣ 𝗦𝗶𝘅 𝗛𝗼𝘁𝗲𝗹𝘀 𝗖𝗹𝗼𝘀𝗲𝗱 𝗶𝗻 𝗢𝗻𝗲 𝗠𝗼𝗻𝘁𝗵 Six hotel properties announced full or partial closures in April, each described as a refurbishment or enhancement programme. ↳ Several are four to six years old. Occupancy hit 22.8% in mid-March, the lowest since April 2020. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Closures at this scale are labor events before they are real estate events. Each one releases operations, F&B, and management staff into the tenant pool. 3️⃣ 𝗥𝗲𝗻𝘁𝗮𝗹 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀 𝗗𝗿𝗼𝗽 𝟯𝟰% New contracts fell to 12,800 in March. Enquiries dropped approximately 40% against pre-conflict levels. ↳ REIDIN recorded the first monthly rent decline of the cycle, down 0.16%. ↳ Long-term listings hit 93,000 as STR operators flee 17% occupancy (versus 85% a year ago). 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Supply flooding in while demand contracts. Pricing power has shifted decisively toward tenants. 4️⃣ 𝗦𝗮𝗹𝗲𝘀 𝗠𝗮𝗿𝗸𝗲𝘁 𝗘𝗻𝘁𝗲𝗿𝘀 𝗮 𝗕𝘂𝘆𝗲𝗿𝘀' 𝗣𝗵𝗮𝘀𝗲 Q1 transactions fell 17% QoQ to approximately 45,200. REIDIN printed the first monthly price decline of the cycle, down 0.32%. ↳ Secondary volume dropped approximately 40% MoM in March. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: End-users priced out during the 2021-2025 rally are finding entry points the market denied for five years. Patience became an investment thesis. 5️⃣ 𝗦𝗰𝗵𝗼𝗼𝗹𝘀 𝗥𝗲𝘁𝘂𝗿𝗻 𝗠𝗼𝗻𝗱𝗮𝘆 In-person schooling resumes April 20, the most concrete normalization signal since February 28. ↳ Families who deferred relocations, renewals, and purchases resume calendar-driven decisions now. 𝗪𝗵𝗮𝘁 𝗶𝘁 𝗺𝗲𝗮𝗻𝘀: Schools restore one anchor of residential demand. The structural pressures remain. The paralysis lifts. 🔥 𝗖𝗹𝗼𝘀𝗶𝗻𝗴 𝘁𝗵𝗼𝘂𝗴𝗵𝘁: Rental, sales, and hospitality confirmed the correction in the same month. The long-range case for Dubai holds across all of it. The discipline is knowing which timeline governs your next decision. For readers working through what this means for a portfolio or board conversation, my DMs are open.

Stop celebrating rent growth. This map tells a more dangerous story. This image shows rent burden by state in 2024, the share of renter households spending more than 50% of income on rent. Nationally, that number is 24.3%. In Florida, it’s 30.1%, the highest in the U.S. At first glance, many investors read this as demand strength. That’s the wrong conclusion. Here’s the problem. Rents have risen faster than wages. Supply surged unevenly. Insurance, taxes, and operating costs were passed straight to renters. When one in four renters is financially stretched, pricing power becomes fragile. Renewals slow. Delinquencies rise faster in downturns. And political pressure doesn’t wait for NOI to recover. This is why high rent burden is frustrating and costly. It looks like growth on paper. But it quietly increases operational risk, regulatory risk, and volatility at exit. The smarter operators are already adjusting. They’re not underwriting aggressive rent bumps. They’re watching where supply is rolling off, where rent growth can return without breaking affordability, and where efficiency beats escalation. This map isn’t a warning against investing. It’s a warning against lazy assumptions. If you’re underwriting deals the same way you did three years ago, this data should make you uncomfortable. And discomfort is often the first signal that strategy needs to evolve. Look closer. The opportunity isn’t where rent is highest, it’s where rent stress stabilizes before supply tightens again. Sources: Visual Capitalist U.S. Census Bureau, American Community Survey (2024 1-Year Estimates) Shimberg Center for Housing Studies #RealEstateInvesting #Multifamily #HousingMarket #RentTrends #RiskManagement #MarketAnalysis #InvestSmart

Which is faring better through the Supply Tsunami? Class B or Class C assets? We know from the work of Jay Parsons and others that filtering, the movement up through asset classes by renters when rents are under pressure, is a real thing. That adding additional supply into a marketplace puts downward pressure on all asset classes, not just the upper end of new deliveries. (He did a great analysis of the markets who are seeing the greatest rent retraction markets relative to new inventory being delivered that is linked in the comments below). But which asset class feels it the most, B or C?  That was the question I attempted to answer. I started by looking at the top 20 major markets that have had the most deliveries as measured as a percentage of existing inventory. Taking a New Lease Asking rent view, we find that since January 2023, rents have retracted across both market segments,   ~ Class C asking rents since 2023 – down (0.13%) ~ Class B asking rent since 2023 – down (0.01%) So clearly the answer is Class B is doing better….right?  Not so fast. There is the other half of the rent roll…renewals….and it really tells the story. The table below lists the comparison of how the current average (JAN 2023 - JUL 2024) compares historical (JAN 2010 - JUL 2024) in each of the markets and each segment. In other words, is the market segment performing better or worse than it typically does.  And it reveals some interesting tidbits. First - Rent:Income levels are not meaningfully moving in any of the markets reviewed.  The trend definitely moved up but by less than 2% in every market reviewed. Second - only two markets in either the B or the C asset classes are experiencing renewal conversion lower than their 14 year average. Which tells me that the efforts operators are making to maximize retention is working and that in general, residents are not looking to make a move up in asset class. Third - where the performance really diverges is the ability to still drive stronger rent growth on renewals. In the Class C segment, every market is renewing at levels higher than their 14 year average with the exception of 3 markets (Austin, Denver & Phoenix). Conversely, in only 7 markets do we see Class B renewal rents above their 14 year average with the other 13 in negative territory. Ultimately, when we look at Trade Out Rents, the difference between the previous in place lease and the current in place lease across the totality of the rent rolls in these markets, we see that Class C sees a retraction of (1.06%) while Class B is outpacing the decline with a decrease of (1.90%). At the end of the day, the analysis shows that Class C is outperforming and they are accomplishing it through renewal performance. #multifamily #multifamilyinvesting #apartments

U.S. apartment rent change for new move-in leases lost steam during the past couple of months. Results register just barely in positive territory on an annual basis according to some data sources, while there’s slight backtracking year-over-year in the stats from some other info providers.   Let’s call the move-in rent pricing numbers basically flat as of September 2025 versus September 2024.   Apartment owners and operators still are realizing a little revenue growth, however, as rents for renewal leases continue to climb. The latest renewal lease rent increase calc from RealPage comes in at 3.5%, with roughly 56% of households opting to stay in place when reaching the end of their initial leases. Year-ago renewal lease rent growth was at 3.8%, about the same as the level seen now.   Digging deeper into the data, overall stability in renewal lease pricing power masks some shifts in momentum that may provide some clues to where market performance is headed over the near term.   Renewal lease rent growth is accelerating meaningfully in the San Francisco Bay Area and Chicago. That’s not surprising given the same metros are atop the leaderboard for move-in lease rent growth.   Perhaps more unexpected, renewal lease rent growth appears to be starting to inch up in some of the Sun Belt locations where big blocks of new product in initial lease-up leaves move-in rent change in the red. The first encouraging signs are most apparent in Jacksonville, Atlanta and Charlotte. Renewal lease rent numbers are also a hair better than the year-ago stats in Raleigh-Durham, Dallas-Fort Worth and Austin.   On the other hand, there’s clear weakening of renewal lease pricing power across Denver, the Inland Empire, Boston, the Washington, DC area and Las Vegas. These generally are locations where slowdowns in economic growth are showing up more noticeably than in the nation as a whole.   #LeaseLock #DataDriven #Apartments #Rentals

Oversupply Kills Deals. But smart market analysis prevents it. When evaluating future multifamily supply, not all pipelines are equal. Every phase tells a different story about timing, risk, and impact on rent growth. Here’s how I categorize and analyze the pipeline in every market: 1️⃣ Building Permits: Long-Term Supply These are the earliest signals. A building permit doesn’t guarantee construction, but it represents developer intent and the potential for future competition. Tracking permit trends helps anticipate where new waves of supply could emerge 2-4 years out. 2️⃣Planned Projects: Mid-Term Supply Projects in the planning phase (entitlements, financing, design) show where capital and developers are focusing. Not all will break ground, but patterns in density, location clustering, and scale reveal where the next development hot spots are forming. 3️⃣Under Construction: Short-Term Supply These are the deals that will hit the market soon, usually within 12–24 months. This phase is critical for forecasting near-term rent pressure, absorption challenges, and cap rate adjustments. Every “Under Construction” dot is tomorrow’s competitor. 4️⃣ Lease-Up: Right Now Lease-up projects reflect real-time competition. They shape today’s concessions, pricing, and absorption dynamics. Tracking their performance helps benchmark achievable rents for any new acquisition or development. ✅Don’t Forget Demand. Supply alone doesn’t kill deals; oversupply relative to demand does. Pairing pipeline analysis with job growth, migration trends, and renter income metrics reveals whether a market can actually absorb what’s coming. The best investors don’t just count cranes, they measure who’s moving in, who’s paying rent, and who’s leaving. #Multifamily #RealEstateInvesting #MarketAnalysis #PropTech #DataDriven #SupplyAndDemand #Underwriting #CRE #HousingMarket #MarketStadium

What’s Really Happening in the Northeast L.A. Rental Market? Everyone’s watching the macro story in L.A.—but smart investors are paying close attention to 𝘀𝘂𝗯𝗺𝗮𝗿𝗸𝗲𝘁 𝗶𝗺𝗯𝗮𝗹𝗮𝗻𝗰𝗲. And right now, Northeast Los Angeles is showing three distinct supply-demand stories across just a few square miles. Here’s how it breaks down: 📍 𝗛𝗶𝗴𝗵𝗹𝗮𝗻𝗱 𝗣𝗮𝗿𝗸: A Classic Landlord’s Market    • Vacancy: 3.3%    • <100 units in the pipeline    • Tight supply + higher-income commuters = strong pricing power    • Landlords here have leverage—and it’s likely to stay that way through 2025. 📍 𝗦𝗶𝗹𝘃𝗲𝗿 𝗟𝗮𝗸𝗲 / 𝗘𝗰𝗵𝗼 𝗣𝗮𝗿𝗸: Holding Steady    • Vacancy: 5.4%    • 622 units rising across 13 projects    • YTD absorption (179 units) is keeping pace with new deliveries (182)    • This is a “watch zone.” Diverse local jobs are helping for now, but a lot of new supply is hitting the market. Owners may need to get strategic if absorption slows. 📍 𝗘𝗮𝘀𝘁 𝗛𝗼𝗹𝗹𝘆𝘄𝗼𝗼𝗱: Pipeline Pressure    • Vacancy: 5.8%    • 2,077 units under construction    • Big deliveries at Carlton Way, Hoover St, and Enlightenment Plaza mean concessions are coming. Unless studio and hospital hiring ticks up, expect a very competitive leasing environment in 2025. 💡 𝗧𝗮𝗸𝗲𝗮𝘄𝗮𝘆: 𝗢𝗻𝗲 𝗿𝗲𝗴𝗶𝗼𝗻. 𝗧𝗵𝗿𝗲𝗲 𝘃𝗲𝗿𝘆 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗼𝘂𝘁𝗹𝗼𝗼𝗸𝘀. Understanding this kind of micro-dynamic is how we find yield where others overlook it. ——— 📩 To stay updated on where PMI is investing next, 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗯𝗲 𝗮𝘁 𝗽𝗺𝗶𝗽𝗿𝗼𝗽𝗲𝗿𝘁𝘆.𝗰𝗼𝗺 #MultifamilyRealEstate #LosAngelesHousing #RealEstateInvesting #PMIInsights #JeffPalmer #RentalMarketTrends