U.S. Apartment Market Reports Vacancy Drop in Q-4 as Rents Rise

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According to New York-based property research firm Reis, U.S. apartment vacancies fell to a two-year low in the fourth quarter as rents rose.

The national apartment vacancy rate dropped to 6.6 percent from 8 percent a year earlier and from 7.1 percent in the third quarter. It was the lowest since 2008's third quarter, when the rate was 6.2 percent, says Reis.

Apartment occupancies have risen as a direct result of home foreclosures forcing many consumers to rent apartments. While the 951,000 jobs added to U.S. payrolls from January to November is a fraction of the 8.4 million lost during the recession, "it is far better than the situation in early to mid-2009, when the nation was terminating hundreds of thousands of jobs per month," Reis said.

Effective rents rose to an average $986 a month from $964 a year earlier and $981 in the prior quarter, according to Reis. Landlords' asking rents also climbed, to $1,042 from $1,026 a year earlier and $1,037 in the third quarter, according to the report.

Reis economist Ryan Severino said, "Despite tepid economic growth and an anemic recovery in the labor market, households appear to be returning in droves to the rental market. The fact that effective rent increases kept pace with asking rents implies that concession packages are likely no longer increasing."

Apartment landlords saw a net increase of 57,891 square feet (5,378 square meters) of leased space during the quarter, up from 18,252 square feet of so-called net absorption a year earlier, said Reis. Together with a net increase of 94,971 square feet in the third quarter, net absorption for the year reached 227,011 square feet, compared with a net loss of 1,649 square feet in 2009.

The drop in vacancies was encouraging because the fourth quarter tends to be a weaker period for rentals. Rental demand usually goes up during the second and third quarters. The recession interrupted that pattern starting two years ago as widespread job cuts prompted many people co-mingle households by moving in with parents or friends instead of renting their own apartments.

 

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