Could the blistering pace of multifamily rent increases get even better? If new development doesn’t catch up with demand, operators are likely going to be in the sweetest of spots as mounting national occupancy looks to trend above 95 percent, according to data released in November by the Washington, D.C.–based National Association of Realtors (NAR). According to the NAR’s fourth quarter 2011 Commercial Real Estate Outlook? report, the apartment rental market is expected to see vacancy rates fall to 4.3 percent by the fourth quarter of 2012 (down from 5 percent in the previous year’s fourth quarter).

Vacancy rates below 5 percent indicate a landlord’s market, with demand justifying higher rents, the NAR report notes. The market with the lowest apartment vacancies for the fourth quarter of 2011 was Minneapolis (2.4 percent).

“Across all commercial real estate sectors, vacancy rates are expected to trend lower, and rents should rise modestly next year,” says NAR chief economist Lawrence Yun. “In the multifamily market, apartment rents will be rising at faster rates in most of the country next year. If new multifamily construction doesn’t ramp up, rent growth could potentially approach 7 percent over the next two years.”

But while rising occupancy typically signifies higher demand, the ability of operators to raise rents could paradoxically be reduced by extremely low vacancy rates that cripple their ability to feed demand. Some markets might already be seeing a corresponding drop in rent growth, even as occupancies climb, says Ron Johnsey, president of Dallas-based multifamily market research firm Axiometrics. “The Class A property growth rate is already starting to flatten,” Johnsey says. “We see it big-time in San Jose [­Calif.] and Seattle. Occupancies are beginning to tick down there, and I think the reason is that if you keep pushing rents, those renters are going to start moving around.”

Tech execs who have adopted revenue management software are likely to grimace at historically high occupancies, as dynamic pricing becomes more effective when a broader range of units can immediately be made available to satisfy daily changes in demand. And with the software becoming increasingly popular among multifamily firms, fine-tuning the factors at play in the software is an ever-changing art form. “We’re managing to revenue now as opposed to occupancy,” said Kip Zacharias, vice president of business services for Houston-based owner/operator Camden Property Trust during the November 2011 National Multi Housing Council Apartment Operations and Technology Conference in Dallas. “Our ability to stay ahead of the market and achieve premiums relative to comps is improved.”