A combination of rising unemployment, falling population growth and home foreclosures is creating a tough market for Palm Beach apartments. Investment activity in the county remains subdued, with economic concerns and stringent financing requirements relegating many prospective buyers to the sidelines, Marcus & Millichap states.

"Very few sales of distressed properties have yet to occur, but some properties bought at the peak of the market in 2005 and 2006 could encounter difficulties in the quarters ahead as softening fundamentals reduce property income," says Greg Matus, regional manager with Marcus & Millichap in Fort Lauderdale. He notes that key areas of interest for prospective buyers include Boca Raton, West Palm Beach and Boynton Beach.

Asking rents are forecast to fall nearly 4% to $1,067 per month, while effective rents are expected to tip below the $1,000 mark. On the bright side, there is minimal development activity, with only 700 units at two complexes currently under way, according to Marcus & Millichap research.