Apartment Vacancy Rates are Moving on Up

rentals  zimbio creditOn the apartment rental scene, according to multifamilyexecutive, many have posited that there is an insatiable demand for rental units, with millions of Gen Y living at home yearning to break out, they do not want to own, and vacancy rates will continue to fall.

Au contraire, says Ryan Severino, demand has already fallen slightly. From the second quarter of 2013 to the third quarter of 2015 the national vacancy rate has remained at 4.3 percent, indicating a general balance in supply and demand.

During the recovery following the housing bubble, demand was higher than supply for Class A properties. Now, as most developers are building Class A units exclusively, the construction-to-absorption ratio has increased from a miniscule 0.4 in 2011, yearly inching up to 1.2 last year where it has remained, meaning there are more new units being delivered than being absorbed.

Class A vacancy rose 100 basis points (bsp) from 4.6 percent in Q1 2013 to 5.6 today. B/C properties have fallen 110 bps, primarily because no one is building B/C properties. Owners of older buildings are striving to renovate to maintain their B/C status as the new Class A units come up with advanced features.

It’s basically the same amount of work to build either, as MHProNews understands, but Class A units have added features, nicer interiors, more amenities. The higher rent pays for the A rating over time.

As MHProNews knows multifamily construction has been the driver in new residential construction, while new single-family has lagged and see-sawed.

Severino says many Class A developers are convinced there is insatiable demand, while others are certain that while vacancy may rise, their properties are better than “the others.” He says the market is so competitive it’s near impossible to set themselves apart from others regardless of “what a great view their properties boast from the roof-deck fire,” as he reiterates: “Class A vacancy is already on the way up … and vacancy for the overall market is sure to follow.##

(Photo credit: zimbio)

matthew-silver-daily-business-news-mhpronews-comArticle submitted by Matthew J. Silver to Daily Business News-MHProNews.

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