US Apartment Vacancy Rate Reaches 23-Year High and Will Continue to Climb

October 6, 2009

(ChattahBox)— A stubbornly sluggish economy and high unemployment rates have contributed to one of the worst performances of the apartment rental market, not seen since 1986. According to a study conducted by the real estate research firm Reis Inc., the U.S. apartment vacancy rate rose to a record high of 7.8 percent in the third quarter, despite efforts by landlords to lower rents.

The real estate firm noted that the lack of job growth, the primary driver of the apartment rental market, was largely responsible for the high vacancy rates. Vacancies have been steadily rising since the third quarter of 2007, and have not yet bottomed out, according to the report.

Reis predicts that the vacancy rate will climb over 8 percent by the final quarter or by next year. Victor Calanog, Reis’ director of research notes that a vacancy rate of over 8 percent would represent the highest vacancy rate since Reis began tracking the market in 1980.

According to the report:

“In the third quarter, the U.S. apartment asking rental rate fell 0.5 percent to $1,035 per month, the fourth consecutive declining quarter. Factoring in months of free rent and other perks landlords have been using to lure or keep tenants, effective rent fell 0.3 percent to $972, also the fourth consecutive quarter of declining rent.”

And the rise in apartment vacancy rates does not bode well for the greater commercial real estate industry, which is not yet showing a comparable rise in vacany rates, because of longer commercial leases.

“It makes me wonder whether the avalanche is on its way for office and retail (real estate) unless things change really quickly and really drastically,” said Calanog.

Reis does not foresee improvement in the apartment market until at least the second quarter of 2010 at the earliest.

Source


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