On a national scale the real estate market has been experiencing a continuous decline in values in just about all sectors since things turned in 2007– residential, rural, commercial, multifamily and industrial.
There is one sector however that has recently seen a significant upswing in activity that should bode well for investors in the multifamily real estate sector.
According to an October 15, 2010 Analysis of Third Quarter 2010 of the US Apartment Sector published through RIES.com, a leading provider of impartial commercial real estate performance information, activity during the third quarter shows “that recovery in the apartment rental sector appears to be firmly rooted. National vacancies fell by 70 basis points, from 7.8 to 7.1 percent … one of the sharpest drops in vacancy on record.”
The report goes on to identify the causes to be tied to “pent-up demand from renters tired of living with their families or roommates … [and] flat or declining trends in housing prices and mortgage rates.” As to latter many of those qualified to purchase a home seem to be concerned that housing prices will continue to fall. So they would rather lock into a twelve-month lease for an apartment versus commit to buying a home and a 30-year mortgage. In addition many tenants are concerned about job security and would rather keep their options open.
At the local level here in Frederick County, while the region vacancy rate runs in the 6% range, the picture seems to be a bit more complicated to hold to that figure. In recent interviews with a number of apartment property managers it appears that of class A and B projects over 200 units with rents over $1,200 per month struggle for stability, and have to offer a number of incentives to hold on to existing tenants and lure new ones to their units.
On the other hand class A and B projects that are smaller – 50 to 200 units – with rents under $1,000 per month, occupancy rates are at or near 100%. We also are finding that the demand has been strong and steady enough during the last quarter that incentives have been minimized or dropped completely with some projects even increasing a bit.
At MacRo, Ltd., we have been very fortunate our apartment portfolio currently running with near zero vacancies. Visit our website to learn more about our property management services.