This year promises to be a ‘robust’ period for the multifamily housing sector, according to the ‘Spring 2012 U.S. Multifamily Report’ published by Cassidy Turley.
‘Of the 50 major markets that we track, 26 areas closed 2011 with vacancy rates below the 5 percent mark,’ says the report. Yet, despite the fact that 5 percent vacancy is typically the threshold for rent growth, every metropolitan area in our survey posted rent increases over the past year. With early indications that job creation is accelerating in 2012, there will be no letdown in demand for apartments this year.
‘Pent up demand and demographics point to the same trend,’ the report continues. ‘According to current population survey data, household formation growth has averaged just 500,000 for most of this recession-recovery period. The average is 1.2 million, meaning a return to the norm will create a new wave of renters. It is also worth noting that echo boomers – those born in 1986 or later – are now entering their prime rental years. Both factors suggest there will be a steady flow of demand feeding the multifamily sector for many years to come.’
New York City registered the lowest apartment vacancy level in the report, at 2.4%, followed by Minneapolis at 2.5% and Portland, Ore., at 2.7%. Other high-occupancy markets include San Jose, Calif., and Seattle (tied at 2.9% vacancy), San Diego (3.1%), San Francisco (3.3%) and Pittsburgh (3.5%).
Cassidy Turley notes that while the economy begins to gain momentum, the multifamily sector will ‘remain robust over the course of 2012’ as vacancies decline and the rental growth rate increases.
‘Meanwhile, prices will continue to escalate for Class A and B product while cap rates compress on most product type,’ the report predicts. ‘[However], the greater mix of sales beyond the major metros and lower quality deals in most markets may skew aggregate pricing levels downwards.’