"The renter pool is increasing and the delivery of new units has slowed for three consecutive years, leading to a projected vacancy reduction this year," Chaben says. "With lower vacancy, owners will begin to trim concessions, boosting effective rents and property incomes by year end."

Marcus & Millichap recently released its annual report on the state of the Detroit area apartment market. According to the report, area developers are on track to deliver 475 units this year, down 20% from 2004. While construction of rental units has slowed, condominium development has accelerated. Demand for condos in areas such as Plymouth and Royal Oak is high, pushing up prices as a result. Vacancy is improving and projected to fall 0.2% by the end of the year to 6.8%. The highest vacancy rate is currently in the Novi/Livonia area, where rates have reached 9.2% as new supply outpaces demand.

The firm says asking rents are expected to increase 1.2% this year to $811 per month. According to the report, concessions are slowly declining as the apartment market improves. Properties that once offered one-month free rent are now reducing security deposits and waiving application fees instead. As a result, effective rents are forecast to increase 2% by year-end to $752 per month.