Apartment vacancies in the U.S., which reached a record high of 7.4 percent in 2009, will fall this year as job losses stabilize and fewer new rental homes enter the market, according to a new study conducted by CB Richard Ellis Group Inc.
The vacancy rate will decline to 6.8 percent in 2010, according to the report. Effective rents, or what tenants pay after concessions, will end the year less than 1 percent down from the fourth quarter of 2009. Rents fell 4.7 percent in the final quarter of last year from a year earlier.
Apartments could fill up quickly as employers begin hiring again and Americans in their 20s and early 30s give up sharing housing with roommates and parents, Bryce Blair, Chief Executive Officer of apartment developer AvalonBay Communities Inc., said in an interview last month. Builders will have to ramp up rapidly to meet demand after cutting apartment starts by 58 percent last year.
"We're seeing some stabilization in fundamentals for apartments as we do in the broader economy," said CB Richard Ellis Senior Economist Gleb Nechayev, who expects job growth in the fourth quarter. "This gives us reason to be cautiously optimistic."
Manhattan, Boston, Washington D.C, Denver and Seattle are among the markets where rents will rise, Nechayev said.
In Boston, monthly rates will climb 2.8 percent in the fourth quarter of 2010 compared with a year earlier. Rents will increase about 1 percent in Washington and Seattle and 2 percent in Denver, he said.
Incentives such as parking and rent reductions might be bolstering the Boston market, said Matthew Petty, General Manager of Exit Realty Associates in Boston. Rents in the city slid 2 percent in the fourth quarter of last year compared with a year earlier and should rebound this year, CB Richard Ellis said.
"Landlords have woken up to the fact that the economy is not as strong as it was three years ago, and rents have become more reasonable," Petty said. "Still things aren't great. They're just moving in the right direction."
CB Richard Ellis bases its forecast on professionally managed buildings across 60 U.S. metropolitan areas.