Deterioration in the
nation's apartment and
multifamily markets in the
first quarter of 2009 has
some landlords concerned. As
unemployment rises, the
rental market continues to
weaken as evidenced by an
increase in vacancy rates,
drops in rental rates and
CMBS delinquencies above 3%.
Hopes that the downturn in
housing would bring back
former homeowners as renters
isn't playing out thought.
According to REIS Inc., a
New York real estate
research firm, the vacancy
rate for the top 79 U.S.
markets jumped to an average
7.2%, a full percentage
point increase over the past
two quarters and the highest
level since the Q1 2004.
Surprising,
is
the
steep
increase
in
vacancies
came
even
as
apartment
owners
reduced
rents.
Gross
potential
rents
(GPR)
fell
.6%
this
year
alone.
While
this
number
may
not
seem
large,
it's
the
largest
drop
since
REIS
began
its
count
in
1999.
Effective
rents,
GPR
-
concessions,
fell
in
Q1
2009
to
an
average
collected
rent
of
$984
per
unit.
What
this
shows
is
apartment
owners
are
willing
to
drop
rents
before
they
offer
any
incentives.
And
the
future
holds
little
hope
for
a
reversal.
Reis
is
forecasting
rent
declines
of
as
much
as
2%
for
the
year
and
a
vacancy
rate
that
tops
out
at
about
8%,
the
highest
level
since
the
late
1980s.
Once
thought
to
be
immune
from
the
recession,
apartment
and
multifamily
vacancies
are
pushing
more
owners
into
delinquency.
Looking
at
CMBS
default
and
delinquency
rates,
the
multifamily
sector
posted
the
highest
delinquency
rate
in
February,
reaching
3.3%
from
3%
in
January,
according
to
Standard
&
Poor's.
$3.2
billion
in
multifamily
debt
was
delinquent
in
Q1
2009,
up
from
about
$1.5
billion
in
the
Q3
2008.
The
delinquency
rate
on
multifamily
loans
held
or
insured
by
Fannie
Mae
rose
88%
in
the
fourth
quarter
to
0.3%.
Since
Q3
2006,
apartment
vacancies
have
trended
up.
Thoughts
are,
over
capacity,
due
in
part
from
failed
condo
projects
converted
to
rentals,
and
the
supply
of
foreclosed
homes
competing
for
renters.
Adding
fuel
to
the
fire,
a
deteriorating
job
market
that
has
accelerated
the
pace
of
vacancies
and
is
putting
downward
pressure
on
gross
potential
rents.
Markets
that
are
most
impacted
seem
to
be
those
markets
that
had
a
serious
housing
problem
to
begin
with.
Rents
fell
at
least
1.5%
across
all
Southern
California
markets,
and
1.3%
in
Fort
Lauderdale,
Fla.
Most
Southern
and
Midwestern
markets
also
fared
poorly.
However
all
is
not
lost.
There
were
signs
of
improving
or
stabilizing
in
markets
that
were
among
the
first
to
enter
the
downturn.
Some
markets
in
Florida,
St.
Petersburg
and
Miami
for
example,
have
seen
rent
increases
by
.07%
and
.04%
respectively.
Highest Vacancy Rates |
|
Lowest Vacancy Rates |
|
Metro |
Rate |
Metro |
|
Columbia, S.C. |
13.5% |
New York |
3.4% |
Jacksonville, Fla. |
12.7% |
Long Island, N.Y. |
3.6% |
Memphis |
12.4% |
Syracuse |
3.9% |
Charleston |
11.5% |
Central New Jersey |
4.0% |
Phoenix |
11.3% |
New Haven, Conn. |
4.2% |
|
|
U.S. |
7.2% |
|