AS THE APARTMENT RECOVERY takes shape, market watchers have agreed on a term to describe the way things are progressing so far—surprise.

“Usually, we see a recovery in occupied space before we see a recovery in rent growth,” says Victor Calanog, director of research for New York-based Reis. “It was the strongest first quarter on record [in terms of rent growth] in about 10 years. Even compared to boom times, this was a really strong first quarter.”

Reis said effective rents moved up 0.3 percent in the first quarter of 2010, as vacancy levels hovered around 8 percent due to an additional 20,000 new units coming online. That was the first positive rent movement since the third quarter of 2008.

“The most surprising thing I see going on is how quickly we've gone from rent cuts to rent hikes,” says Greg Willett, vice president of research and analysis for Carrollton, Texas-based M/PF Research, despite reporting same-store rents falling 3.1 percent. “We didn't have that period where they got stuck at the bottom.”

But as apartment owners look back over the first part of the year, the question remains: Why did things change? And ultimately, will the growth continue?

Conventional wisdom says that revenue management systems kept bigger operators from letting their vacancies fall too far. Instead, they cut prices. But Calanog attributes much of the jump to an unseasonal spike in demand. “Most households don't move or lease new space until the second or third quarter,” he says. “I think the downturn was so severe that it broke traditional expectations of seasonality.”

Still, Calanog, who sees another 75,000 units in supply coming online later this year, doesn't know if this trend will continue. With the European economy in trouble, it could eventually cost Americans jobs. Add that to new supply coming online, and apartment operators may not be quite out of the woods yet.

“Unless job growth keeps on pace, then we may see a case where the first quarter was strong, but we basically run out of gas,” he says.