The 0.7% increase is good news compared with Northern California cities such as San Francisco, which saw a 10% drop that still put average rents at over $1,600, according to RealFacts.
One reason that rents have been minimally impacted by the drop in occupancy is that new building has remained slow, according to the multifamily information service. After a spurt of building in the late 1990s, permit activity dropped dramatically in 2001-02. Marcus & Millichap expected only 1,200 new apartment units would be built in 2002, compared with 1,300 built in 2001.
Developers are still hesitant about investing in new construction in greater Portland, despite lowered interest rates that have spurred the construction of new single-family homes in early 2002, according to RealFacts. This restraint means that when employment goes back up again, the apartment market should rebound quickly.A report late last year by multifamily brokerage firm Hendricks & Partners showed that despite continued negative absorption eroding occupancy and rents, jobs in the Portland metro area actually saw gains during the first half of 2002. But the longer-term outlook for Portland remains dim. The metro area is keeping company with Phoenix and Tacoma in Axiometrics Inc.'s list of the 10 weakest apartment markets forecast for the period from 2003-05. The firm ranked 70 markets by revenue potential during the 2003-05 period as measured by projected vacancy rates and rental rates.Axiometrics says the markets with the best prospects for recovery in 2003-2005 are Boston, Stamford, Conn., San Diego and Orange counties and the Inland Empire in California, Detroit, Broward County, Fla., and Oakland, Calif.
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