- Mike Ochs
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It’s a Renter’s Market
Apartment vacancies in the United States hit a 30-year high during the fourth quarter of 2009 as many would-be renters moved in with family or roommates to save money. According to Reis, Inc., a New York research firm that tracks vacancies and rents in 79 markets across the country, the apartment vacancy rate was eight percent at year’s end.
Rents declined by three percent in 2009, even as landlords upped the ante to attract creditworthy renters. In New York City, effective rents – which include concessions such as one month free rent – fell 5.6 percent last year, the worst performance since Reis first tracked data in 1990. Asking rents fell 2.3 percent from 2008 to an average of $1,026. Effective rents, what tenants actually paid, decreased three percent to $964.
“We’ll shampoo their carpets. We’ll paint accent walls. We’ll add Starbucks cards,” said Richard Campo, chief executive of Camden Property Trust, a Houston-based REIT that owns 63,000 apartments. Complicating the situation is competition from 120,000 new rental units that came on the market last year. These include some failed condominium projects that were converted to rentals. A hefty percentage of these developments had secured loans before the credit markets froze. With new development at a virtual standstill, apartment completions are expected to decline 50 percent in 2011. For apartment owners, the limited new supply means they can increase rents as soon as job growth returns.
“If you are renting a place, now might be a good time to renegotiate that lease,” advises Victor Calanog, Reis’ director of research, who predicts that the apartment sector could recover in the second half of 2010 if jobs start returning or people think the economy is improving.