Apartment Industry Outlook

Apr 19

Written by: THE CABOT GROUP
4/19/2012 8:20 AM  RssIcon

Submitted by J. Debes
Marcus & Millichap recently released THE APARTMENT OUTLOOK for 2012.

Here are some interesting highlights from the report:

  • The apartment sector has fully moved into an expansion cycle as defined by the broad based recovery in vacancy rates, rising rents, improved operations for Class B and C properties, and the start of a new construction cycle
  • Historically, seasonal factors such as inclement weather, the holidays, and low turnover rates temper apartment leasing activity in the fourth quarter of the year.  However, since 2009, fourth quarter absorption levels have exceeded most other quarters
  • Despite record low mortgage rates and home prices a preference to stay mobile continues to sideline many prospective buyers - apartment turnover rates due to residents becoming first-time homeowners had diverged from the long-term average of 25% by nearly half
  • The national vacancy rate will approach a 10-year low of 4.8% pushing rent gains close to 5%
  • Overall cap rates at 6.5% (down 70 basis points from 2011).  Although pace of cap rate compression is slowing, the spread in cap rates between Class A in top tier markets to Class B/C properties has broadened to 203 basis points from the average differential of 110.  Class A cap rates of 5.7% reflect lows of the 2005-2007 cycle whereas Class B/C rates remain 117 basis points higher

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