IRVINE, CA—Positive demographic trends are keeping wind in the apartment market's sails even as fundamentals are becoming spotty, Ten-X Commercial said Thursday. Among the areas in which fundamentals are uneven is the supply pipeline, a contributing factor in most of the top five markets in which Ten-X recommends that investors consider selling their apartment properties.
Ten-X Commercial's latest US Multifamily Outlook report shows that vacancies nationwide rose 10 basis points during the first quarter to 4.3% after remaining flat over the past year. By the time 2017 is over, 330,000 new apartment units will be added to the inventory, and over time that will have a negative impact on vacancies as the absorption rate lags the influx of new supply. The report projects the national vacancy rate increasing to 5% by 2018 before declining demand pushes it to 6.2% by 2020 during a modeled economic downturn.
Rent growth, too, has faltered, with seasonally adjusted effective rents rising just 0.4% during the first quarter, according to Reis data. Annual growth has tapered to just 3%, in contrast to the greater year-over-year increases seen in 2015 and 2016.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
