As the jobless rate crept up to 6.9 percent in December, apartment owners went on alert. Why? For one, there seems to be an obvious correlation between job losses and vacancy rates.
Ron Witten, president of Witten Advisors, a Dallas-based consulting firm, calculated the correlation. “In a simplified analysis, a 1 percent [increase in unemployment] equals a 1 percent loss of apartment demand,” he says. “In absolute numbers, for every 1 million jobs lost, a perfectly stable market would lose 0.7 percent in occupancy.”
Greg Willett, however, doesn’t see a magic formula. “It varies substantially based on market size, general propensity to rent, and the role of the shadow market in each area,” says the vice president of research and analysis for M/PF Yieldstar, a research firm based in Carrollton, Texas.
Ultimately, apartment fundamentals are still a local game. That’s why Thomas Toomey, president and CEO of Highlands Ranch, Colo.-based UDR, thinks unemployment figures don’t matter at the property level and shouldn’t intimidate site staff. “It’s still a community-by-community, city-by-city business,” Toomey said recently. “We haven’t gotten so darn good that we can tell you the unemployment in the country is 7.6 percent and so our business is going to be X.”
