* Q1 vacancy rate 8 pct, same as Q4 2009
* Q1 Effective rent up 0.3 pct
* Market looks to have bottomed
By Ilaina Jonas
NEW YORK, April 6 U.S. apartment vacancy rates
stopped rising and rents increased modestly in the first
quarter, signs the market is poised to recover, according to
real estate research firm Reis.
The first-quarter U.S. apartment vacancy rate stood at 8
percent, unchanged from the fourth quarter of 2009 but the
highest since 1986, when the rate was 7.8 percent, according to
the Reis report, which was released on Tuesday.
"If the second and third quarter are typically stronger,
and we recorded particular strength in the first quarter, it
certainly looks like we turned the corner this time around, one
quarter sooner than I expected," said Victor Calanog, Reis
director of research.
Moreover, net absorption -- apartments rented after
discounting those vacated -- surged by 20,424 units in the
first quarter, Reis said. It was the largest net positive jump
in occupied stock in the first quarter on record in 10 years,
"It's time to focus on the glass half full," Calanog said.
Graphic on U.S. apartment market:
Such new-found optimism has also been evident in a pick-up
of activity by some large publicly traded real estate
investment trusts. Last quarter, for example, Equity
Residential (EQR.N) said it was acquiring properties in key
markets and AvalonBay Communities Inc (AVB.N) said it was
cautiously resuming some development projects.
Monthly asking and effective rents -- which take into
account months of free rent and other perks -- increased
modestly in the first quarter, up 0.1 percent to $1,027 and 0.3
percent to $967, respectively. It was the first quarterly
effective rent increase since the third quarter 2008, according
The faster pace of effective rent increases versus asking
rents suggests that landlords are making fewer concessions to
would-be tenants and may in fact be reining them in, Reis
Although effective rent fell by 2.3 percent from last year,
it was just half the 5.6 percent decline recorded in 2009,
indicating that rent deterioration has not only slowed down but
has reversed, Reis said.
"If you're a renter right now, it might behoove you to sign
a two-year lease, especially in New York where things might
gallop real quick on the upside," Calanog said.
In metropolitan New York City, the largest U.S. apartment
market, the first-quarter vacancy rate fell 0.1 percentage
points to 2.8 percent. Effective rents grew 0.9 percentage
points to $2,667 a month.
Sixty of the 79 metropolitan markets that Reis tracks
posted gains in effective rents, with Miami leading the way, up
1.6 percent to $1,008 per month.
But not all the indicators in the survey were positive.
Indeed, Reis believes the recovery will be a slow one. More
than 22,000 units of new apartment buildings opened their doors
in the first quarter at an average vacancy of 52.8 percent.
Vacancy levels rose in 30 of the 79 markets.
"Still, this quarter's results taken as a whole, are
consistent with our expectation that the apartment sector will
be the first to recover as the overall economy emerges from the
recession," Calanog said.
(Reporting by Ilaina Jonas; Editing by Steve Orlofsky)