The nationwide occupancy rate is 96.4%, according to Penney, who said he believes the sector will continue to boast healthy returns as long as the supply-demand ratio remains balanced. The country has 34 million renter households, one-third of which rent single-family homes, another 20% that rent apartments in buildings with 2 to 4 units, and the rest--which include some 18 million renters--contain more than 5 units in what he called the "industrial" portion of the sector. His analysis targeted that sector.

Orange County, Boston and Los Angeles were his top picks for the highest performing markets. Orange County has a 98.4% occupancy rate, with 12% average rent increases last year and projected increases this year of 8.5% to 10%. Some 3,700 new apartments are expected in 2001. Boston boasts a 98.9% occupancy rate, with 21% rent increases last year and a projected increase this year of 9.5% to 10%. The market is sorely in need of more units, with only 3,200 completions slated for this year. In Los Angeles, which has a 97.1% occupancy rate, rents went up 8.5% last year and are expected to grow 6.5 to 8.5% this year, with 6,930 new units slated to hit the market.

Orlando, Phoenix and Atlanta were deemed under-performing markets. In Orlando, which has a 94.5% occupancy rate, the 9,500 new units completed in 2000 are still being absorbed into the market, and another 8,430 units are scheduled for delivery this year. Rents rose 1.5% last year and are projected to remain static or grow only another 1.5% this year. Phoenix, which has a 93.1% occupancy rate, also has had an influx of new units, with 8,300 delivered last year and another 8,000 completions this year. Rents rose 2.5% last year and may rise 3% this year. Atlanta's huge construction pipeline (15,975 outstanding permits) and cooling employment rate has put downward pressure on rents, according to Penney. With a 96.4% occupancy rate and rent increases of 4.5% last year, this year's rent growth is slated at between 3.5% and 4.5%.