Multifamily properties have outperformed other commercial property types in the past two years, benefiting directly from the continuing travails of the for-sale housing market.
Unlike the office and retail sectors, which sport vacancies unseen in two decades, the apartment sector has bounced back impressively. After hitting a 30-year high of 8.0 percent at the end of 2009, national vacancies have plummeted to 5.6 percent by the third quarter of 2011, and are expected to dip below 5 percent by early 2012. Asking and effective rents have both posted gains on a consistent quarterly basis since the start of 2010.Occupancies and rents have improved consistently, in seeming defiance of slow economic growth and the lethargic pace of job creation. Signs of weakness have begun to appear, however, for certain segments of the apartment market, suggesting that even the best performing property type in real estate nowadays is still subject to fundamental economic rules.
Multifamily properties will continue to benefit from a convergence of positive factors: first, as the for-sale housing market continues to struggle, fewer households will make the transition from renting to owning a home. Despite record-low mortgage rates, credit still remains tight except for those with the best credit histories and capacity for large down payments. Although the rate of job creation remains moribund, the economy has created over 2 million jobs since 2010, and on the margin individuals are moving out of doubled-up households to rent their own places. (read entire article)
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