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Thursday, October 4,2012

Commercial Real Estate News

Apartments: Everyone’s Darling


Apartments: Everyone’s Darling

Despite market jitters, well-belowexpected job growth, and a weak GDP, apartment fundamentals continue to impress. In fact, rarely have occupancies been as strong and certainly not during a time of such slow economic growth and high unemployment: The average market–rate vacancy dropped 20 basis points in second quarter coming in at just 4.7-percent nationwide.

While some concerned about the sector’s ongoing progress point to greater past declines in vacancy, Vice President of Research and Economics for Reis stresses the market is in a very tight position. And tight market conditions typically facilitate a shift in leasing strategy among landlords, where revenues are grown from rent increases rather than further vacancy declines. In fact, that is what Reis expects—effective rent growth that will accelerate even more as vacancies tighten within the 4-percent band. Of course, in response to the current undersupply, developers have been busy; 10,000 units came online during the second quarter; contributing to this year’s forecast of 70,000 units all told, and many thousands more are on the way.

Increased supply, however, is a necessary but not sufficient condition for inducing any kind of slowdown in improvements in occupancy and rent growth. The other key factor is demand for rentals, which is expected to remain high even in markets like Austin, Texas where supply growth is expected to rise significantly. As always, real estate remains a local game: Some submarkets will see greater building and a subsequent dampening of demand that will hurt the prospects of rentals. Others will take increased inventory growth in stride. To learn more about your specific market or neighborhood of interest, access a Free Property Report from Reis Reports. Your free, address-specific report includes a detailed Metro and Submarket Analysis, plus Rents and Sales. n


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