Apartment rents forecast to rise nationwide
Orange County is not alone when it come to landlords regaining their pricing power for apartment rents. Residential rents are projected to rise this year in all 44 U.S. markets included in a national brokerage’s 2011 apartment forecast.
New York City has moved to No. 1 in Marcus & Millichap’s National Apartment Index, a ranking of metro areas based on a number of supply-and-demand indicators for the current year. Jacksonville, Fla., remained in last place, while five of the seven California metro areas moved up in the ranking. Orange County came in at No. 5 — with a projected 4.5% hike for 2011.
|1||New York City|
|19||Salt Lake City|
|38||West Palm Beach|
The report said:
“The apartment sector will continue to lead the recovery in commercial real estate fundamentals through 2011 as owners capitalize on lower vacancies to raise rents and scale back concessions. In addition, historically light construction levels in most markets over the next two to three years will help owners more than recover the ground lost through the recession. These factors, along with broad-based, though limited, job growth, will propel all 44 markets covered in this report toward falling apartment vacancies in 2011, together with climbing rents.”
Highlights of the report include:
- Asking rents will rise 3.5% to an average of $1,067 a month in the 44 metro areas. Effective rents — or rent collected after concessions and discounts — will increase 4.4% to an average of $1,002 a month.
- Apartment vacancies are projected to fall “to pre-recession levels.”
- *This year “will mark the first across-the-board reduction in vacancy since at least 1990. This is driven by the release of pent-up demand in the aftermath of the Great Recession, lower turnover rates, falling homeownership and job growth.”
- Developers are expected to complete 53,000 new apartments this year, 46% fewer than in 2010. “New supply will again fall critically short of demand, which is expected to reach 158,000 units.”
- California metro areas have some of the tightest vacancy rates in the nation, with some of the highest rents. “These factors drove most markets in the state toward the top of the (apartment index) this year.”
- Of the seven California metro areas in the survey, five are in the top 11. San Jose ranked fourth highest, Orange County ranked fifth, followed by San Diego and San Francisco. Los Angeles ranked 11th. The Inland Empire moved to 32nd highest, up from 37th last year.
- New York advanced from third to first place in the apartment index due to “healthy employment” levels and already low vacancies. Washington, D.C., ranks second and Boston ranks third.
- Jacksonville remains in last place because of double-digit vacancy rates and because its rent hikes this year are expected to be “well below the national average.” Florida markets generally rank near the bottom of the list , although all are expected to see vacancy rates decline.
- The U.S. economy is projected to add 2 million jobs this year, double the number created in 2010.
The report concludes that “profound concerns and economic risks will linger” well into this year. But they will not “overshadow key indicators that affirm a solid footing for the U.S. economy” in 2011.