| NEW YORK, April 7
NEW YORK, April 7 The vacancy rate for U.S.
apartments hit a three-year high in the first quarter and
asking rents dropped the most in at least 10 years as the
number of excess apartments on the market ballooned, according
to real estate research firm Reis Inc.
And the figures are forecast to get even worse as more
apartment buildings are expected to open this year, increasing
supply, and as the U.S. employment picture gets uglier, Reis
Job creation is the No. 1 driver of demand for apartments.
"Given that things are weakening right now, any new
buildings that come on will add additional pressure to
landlords," Victor Calanog, Reis director of research, said.
The national apartment vacancy rate rose to 7.2 percent in
the first quarter, up 0.60 percentage points from the prior
quarter and 1.1 percentage points from a year earlier,
according to the report, released on Tuesday.
Since reaching a cyclical low of 5.5 percent in the third
quarter of 2008, the U.S. apartment vacancy rate has surged 1.7
percentage points, Reis said.
It was the highest vacancy rate since the first quarter of
2002. That was right before the last downturn bottomed out, but
Reis expects the picture to get a lot darker as "we are
arguably only at the beginning of the current downturn."
Behind the rising vacancy rate is a build-up of available
apartments. The number of vacant apartments added was 31,878
units in the first quarter. This was the largest amount of
excess apartments the sector has seen since the first quarter
of 2002 and does not include empty condos for rent.
Asking rents fell by 0.6 percent to $1,046 per month, the
largest single-quarter decline since Reis began reporting
quarterly performance data in 1999.
Effective rent, which factors in months of free rent, and
other concessions and freebies, fell 1.1 percent to a monthly
rent of $984.
Some 22,833 units came online in the first quarter of 2009,
and Reis expects a total of over 90,000 units to come online
Many heads of apartment real estate investment trusts
expect that revenue in the best markets could be flat on a
year-over-year basis, David Neithercut, chief executive of
Equity Residential (EQR.N), said last month in a conference
call in which he was joined by Camden Property Trust (CPT.N)
CEO Ric Campo, Home Properties HME.N CEO Ed Pettinella, and
Mid-America Apartment Communities Inc (MAA.N) CEO Eric Bolton.
Neithercut said landlords were giving generous concessions
in order to maintain occupancy rates.
In the New York metropolitan area, the largest U.S.
apartment market, the vacancy rate rose 1.1 percentage points
to 3.4 percent in the first quarter -- the largest
single-quarter increase since at least 1999. Effective rent
fell to $2,728 a month, down 2.6 percent from the prior
The decline was exceeded only by the San Francisco area,
where the effective rent fell 2.8 percent to $1,775.
(Reporting by Ilaina Jonas; Editing by Gary Hill)