Apartment Occupancies Set to Hit Historical Highs via Multifamily Executive Magazine

Apartment pundits question traditional occupancy thresholds as vacancies trend toward historic lows.

Could the blistering pace of multifamily rent increases get even better? If new development doesn’t catch up with demand, operators are likely going to be in the sweetest of spots as mounting national occupancy looks to trend above 95 percent, according to data released in November by the Washington, D.C.–based National Association of Realtors (NAR). According to the NAR’s fourth quarter 2011 Commercial Real Estate Outlook? report, the apartment rental market is expected to see vacancy rates fall to 4.3 percent by the fourth quarter of 2012 (down from 5 percent in the previous year’s fourth quarter).

Vacancy rates below 5 percent indicate a landlord’s market, with demand justifying higher rents, the NAR report notes. The market with the lowest apartment vacancies for the fourth quarter of 2011 was Minneapolis (2.4 percent).

“Across all commercial real estate sectors, vacancy rates are expected to trend lower, and rents should rise modestly next year,” says NAR chief economist Lawrence Yun. “In the multifamily market, apartment rents will be rising at faster rates in most of the country next year. If new multifamily construction doesn’t ramp up, rent growth could potentially approach 7 percent over the next two years.”

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