NEW YORK (Reuters) - U.S. apartment rents rose and the vacancy rate fell to its lowest level in more than three years in the second quarter as economic trends and limited apartment construction kept the rental market tight, according to preliminary data from real estate research firm Reis.
In a report issued on Thursday, Reis said the April-June vacancy rate fell 0.20 percentage points to 6 percent from the first quarter while asking rent rose 0.5 percent to $1,052 a month.
For more than a year, the U.S. apartment sector has been the darling of commercial real estate, with rent, occupancy rates and building prices rising.
Reis does not expect that to change, given a constrained supply after almost no capital was available for construction in recent years due to the financial crisis.
“We still expect to see limited supply growth until at least the later stages of 2012,” Reis senior economist Ryan Severino said.
Only 8,675 units came online in the second quarter, the second-lowest quarterly number for new completions since the record low first quarter. Reis began tracking quarterly apartment fundamentals beginning in 1999.
Factoring in months of free rent and other perks landlords use to attract tenants, effective rent rose 0.6 percent to $997 per month in the second quarter.
Effective rent is up 2.4 percent over the past 12 months, a sign that landlords are trimming concessions and enjoying greater bargaining power.
Eighty of the 82 markets that Reis tracks for the report posted higher effective rents in the second quarter.
The second-quarter vacancy decline was less dramatic than the 0.4 percentage point drop in the first quarter, indicating the apartment market was not immune from the slowing economy.
But demand for rental apartments is seen continuing to grow given demographics and because of tougher lending standards for would-be home buyers.
“You still have really good demographics that are backing this,” Severino said. “You do have household growth, population growth.
“You do have a bunch of 20- to 34-year-olds who want to move out of mom and dad’s basement and don’t want to share an apartment with Chuck and Zed who never clean the bathroom and don’t wash the dishes,” he said.
Green Street Advisors, a real estate investment research firm that follows publicly traded real estate investment trusts said it expects the improved rent and occupancy to last through the year. REITs are often in the strongest markets or locations and have access to different types of loans and capital to finance acquisitions and construction.
By market, New Haven in Connecticut displaced New York City as the tightest rental market with a 2.5 percent vacancy rate.
The vacancy rate in New York City — which excludes Staten Island — rose 0.10 percentage points to 2.8 percent. But landlords were able to push rents up 1 percent to $2,826 per month.
Jacksonville, Florida posted a second-quarter rental decline, to $759 a month, but that came off a very strong first quarter, Reis said. The hard hit market of Las Vegas, which had not posted any rent increases since the third quarter of 2008, edged up 0.3 percent in the second quarter to $769 a month.
Reporting by Ilaina Jonas; Editing by Tim Dobbyn