The first-quarter U.S. apartment vacancy rate stood at 8 percent, unchanged from the fourth quarter of 2009 but the highest since 1986, when the rate was 7.8 percent, according to the Reis report, which was released on Tuesday.
If the second and third quarter are typically stronger, and we recorded particular strength in the first quarter, it certainly looks like we turned the corner this time around, one quarter sooner than I expected, said Victor Calanog, Reis director of research.
Moreover, net absorption — apartments rented after discounting those vacated — surged by 20,424 units in the first quarter, Reis said. It was the largest net positive jump in occupied stock in the first quarter on record in 10 years, Reis said.
It’s time to focus on the glass half full, Calanog said.
Such new-found optimism has also been evident in a pick-up of activity by some large publicly traded real estate investment trusts. Last quarter, for example, Equity Residential said it was acquiring properties in key markets and AvalonBay Communities Inc said it was cautiously resuming some development projects.
Monthly asking and effective rents — which take into account months of free rent and other perks — increased modestly in the first quarter, up 0.1 percent to $1,027 and 0.3 percent to $967, respectively. It was the first quarterly effective rent increase since the third quarter 2008, according to Reis.
The faster pace of effective rent increases versus asking rents suggests that landlords are making fewer concessions to would-be tenants and may in fact be reining them in, Reis said.
Although effective rent fell by 2.3 percent from last year, it was just half the 5.6 percent decline recorded in 2009, indicating that rent deterioration has not only slowed down but has reversed, Reis said.
If you’re a renter right now, it might behoove you to sign a two-year lease, especially in New York where things might gallop real quick on the upside, Calanog said.
In metropolitan New York City, the largest U.S. apartment market, the first-quarter vacancy rate fell 0.1 percentage points to 2.8 percent. Effective rents grew 0.9 percentage points to $2,667 a month.
Sixty of the 79 metropolitan markets that Reis tracks posted gains in effective rents, with Miami leading the way, up 1.6 percent to $1,008 per month.
But not all the indicators in the survey were positive. Indeed, Reis believes the recovery will be a slow one. More than 22,000 units of new apartment buildings opened their doors in the first quarter at an average vacancy of 52.8 percent. Vacancy levels rose in 30 of the 79 markets.
Still, this quarter’s results taken as a whole, are consistent with our expectation that the apartment sector will be the first to recover as the overall economy emerges from the recession, Calanog said.
(Reporting by Ilaina Jonas; Editing by Steve Orlofsky)
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