M&M data shows only 12 sales in the first half compared to 46 at this time in 2002 and an average 44 sales in each of the last three years. "Owners are listing fewer properties," says Steven M. Ekovich, vice president and regional manager in M&M's local office. "Buyers, on the other hand, are attracted by the relative stability of the multifamily market and readily available, low-cost financing."
As a result, Ekovich says "prices are likely to climb higher (in the rest of 2003), with cap rates falling for the few properties that will be listed and sold."
The solution for buyers is that "they may have to offer top dollar to get owners to part with their apartment properties," says the M&M executive. "But affordable financing will permit investors to earn steady returns on their assets."
Despite a rising vacancy rate and a slowdown in new construction, Ekovich predicts a 2.4% increase in total employment over the next 12 months will rejuvenate demand in the apartment sector. A total 4,700 new units are expected in 2003, down from 5,300 apartments in 2002.
Vacancies are at 9.5%, up from 8.8% in the second quarter of 2002--a rise of 70 basis points in 12 months. Even with growing vacancies, property owners are raising asking rents but then offering concessions which lower the effective rents, Ekovich says.
For example, the average asking monthly rent in second quarter 2003 was $749 per units, up from $729 per unit last year. But concessions in the form of free rent and parking lowered the effective average rent to $682 per unit, down from $688 in 2002.
M&M remains bullish on the metro multifamily market in 2004, largely because of predicted employment growth. But the bulk of those jobs are in the tourism sector where minimum wage is generally the scale.
Still, the report says the city employment grew by 1.5% in the past 12 months, an increase of 14,000 jobs. M&M forecasts an additional 22,500 new jobs will be created by mid-2004.
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