U.S. Apartment Market Worsens with Economy
April 8th, 2009Via: Reuters:
The vacancy rate for U.S. apartments hit a three-year high in the first quarter and asking rents dropped the most in at least 10 years as the number of excess apartments on the market ballooned, according to real estate research firm Reis Inc.
And the figures are forecast to get even worse as more apartment buildings are expected to open this year, increasing supply, and as the U.S. employment picture gets uglier, Reis said.
Job creation is the No. 1 driver of demand for apartments.
“Given that things are weakening right now, any new buildings that come on will add additional pressure to landlords,” Victor Calanog, Reis director of research, said.
The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier, according to the report, released on Tuesday.
Since reaching a cyclical low of 5.5 percent in the third quarter of 2008, the U.S. apartment vacancy rate has surged 1.7 percentage points, Reis said.
It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as “we are arguably only at the beginning of the current downturn.”
Behind the rising vacancy rate is a build-up of available apartments. The number of vacant apartments added was 31,878 units in the first quarter. This was the largest amount of excess apartments the sector has seen since the first quarter of 2002 and does not include empty condos for rent.
Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.
