The apartment rental market is tightening as the economy improves, according to Lawrence Yun, chief economist for National Association of Realtors®.
Multifamily vacancy rates are forecast to decline from 5.8 percent in the current quarter to 4.9 percent in the first quarter of 2012.
A pullback in construction is helping stabilize the market. Very limited construction of new commercial real estate over the past few years has essentially fixed the supply of available space, Yun said. This means vacancy rates could fall quickly from any increase in demand for commercial space.
From the first quarter of this year to the first quarter of 2012, NAR expects vacancy rates to decline 0.9 percentage points in the multifamily rental market.
“Apartment rent increases are expected to accelerate from job creation leading to new household formation, particularly among the young adult population who will seek their own housing arrangements ” many will be leaving their parents homes, or choose to live with fewer roommates, Yun said.
Average apartment rent is projected to grow 3.4 percent this year and another 4.2 percent in 2012.
Rising apartment rent in combination with rising oil prices could push the overall inflation rate beyond a comfort level, which could then force the Federal Reserve to raise interest rates later this year or early in 2012, Yun added.
There has been an increase of liquidity in Commercial Mortgage Backed Securities, which is helping to open the commercial market to more property transactions; commercial real estate sales had been stalled over the past few years with excessively tight credit conditions. In terms of development acquisitions, it remains a buyers market for those with cash or who can obtain credit financing.
reas with the lowest multifamily vacancy rates presently are San Jose, Calif.; Pittsburgh; and Newark, N.J, with vacancies in a range around 3 percent. Multifamily net absorption should be 207,000 units in 59 tracked metro areas in 2011.
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