Apartment fundamentals strong; rent growth moderates.

Author:Sorohan, Mike

Apartment market fundamentals remain strong but rent growth rate moderated, reported Reis, New York, and Axiometrics, Dallas.

The national apartment vacancy rate inched downward from 4.7 percent to 4.6 percent in the third quarter--which traditionally shows seasonal strength--said Victor Calanog, head of research and economics for Reis.

"This is the slowest rate of improvement since the recovery began in early 2010," Calanog said. Apartment vacancies declined by an average of 35 basis points per quarter in 2010 and 20 1 1; this year, vacancies fell by 30 basis points in the first quarter and 20 basis points in the second quarter, but just 1o basis points in the third.

Reis reported asking rents increased 0.8 percent in the third quarter and effective rents net of landlord concessions increased a "moderately healthy" 0.09 percent. Both growth rates represent a slight decline from second-quarter rent growth.

Net absorption--the net change in occupied stock slowed. Only 22,615 units leased up in the third quarter., which Calanog called "a clear trend downward from the second quarter's figure" of 31,014 and the first quarter's 36,423. This represents less than half the quarterly average rate of about 50,000 units that the sector enjoyed in 2010 and 2011.

Inventory growth continued at about the same pace as the second quarter, with 13,531 units coming online. "This is still a relatively restrained pace for new construction, and demand for apartments still clearly outstrips supply growth, with absorption figures higher than construction and...

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