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A Vacant Lot

BOSTON-High vacancy will be the fate of US apartment buildings through 2010, says CB Richard Ellis Econometric Advisors, but rent growth may resume in 2011.

By Ryan Clark | Updated on December 13, 2009

BOSTON-The United States’ meteoric unemployment rate has led to the inexorable rise in vacant apartment buildings since the recession began, as couples consolidate living expenses, students moved back home and families down-size their living expenses. Single-family homes amid foreclosures and unpaid mortgages depressed the apartment market further with a burgeoning shadow market, as well. And though these trends will continue to harm the apartment market through 2010, there may yet be an oasis beyond the horizon of 2011.

CB Richard Ellis Econometric Advisors (CBRE-EA) took a sample of three million professionally-managed apartment units and examined effective rents, which will top out at $1,147 in 2010. This is a decline of 0.8% from Q3 2009. Cruising at 7.3% vacancy in 3Q09, 2010 will see a 30 basis point drop—down to 7%. Although a good start, it still remains above the previous high in 2003.

Effective rents will not see any improvement until 2011, when CBRE-EA expects to see more sustainable job growth in most markets, Gleb Nechayev, senior economist, CBRE-EA, tells GlobeSt.com. “We also expect a pretty dramatic decline in multi-housing completions by that time,” he explains. The construction will drop below historically low levels, last seen in the early-90s, Nechayev says.

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