Boca Raton, Fla. — Good news for apartment managers: 2006 will be “the best year for apartment leasing since the 1970s,” said Ron Witten, president of Witten Advisors. Witten made this prediction at the National Multi Housing Council conference, held here January 11.
Witten projects that the average national occupancy rate will rise to 95% by the end of 2006, up from 94.5% in 2005. Average effective rents also will grow, up 4.5%, compared to 3% rent growth in 2005, Witten said.
“We are not building enough rental product to meet the short-term demand,” Witten said.
He makes this statement despite predictions by other market experts that as much as one third of the new condominiums being built will eventually end up on the rental market (for more on the condo market.
Competition from condominium developers has pushed up the cost of land and labor in many markets and has made it nearly impossible to overbuild rental housing because of the loss of rental units to aggressive condominium conversion activity.
Experts also predicted that investment capital would continue to flow into apartment projects, especially as financing companies grow increasingly skeptical of condominiums.
The rental apartment business will “benefit from more aggressive [loan] structure and spread going even lower than they have been,” said Timothy Hadro, managing director for JPMorgan Chase.