The national apartment market posted another strong performance in the first quarter of 2007, according to the quarterly “Performance Monitor” by Marcus & Millichap. Vacancy inched up slightly, but sustained effective rent growth provided healthy year-over-year revenue gains for property owners.
Performance is expected to remain healthy throughout 2007, but owners will have to address increased challenges posed by a slowing labor market and more rental competition from the housing market fall-out. Despite these challenges, the nation's apartment markets will continue to perform relatively well, albeit at a more moderate rate. Construction levels below the long-term trend and strong demographic growth in prime-renter groups will underpin performance.
Revenue growth continued to be driven by increased rents during the first quarter as vacancy remained relatively flat. When compared to one year ago, average revenue increased by 4.6 percent. Annual revenue growth has eased from its recent peak of 5.2 percent recorded in the second quarter of 2006.
Apartment completions totaled nearly 16,000 units in the first quarter of 2007 up slightly from the 13,500 units delivered during the same period one year ago. While completions as a percent of inventory remains extremely low at 0.2 percent, owners and developers need to be mindful of the growing shadow market.
MFE MARKET INDEX
Source: Marcus & Millichap Research Services