vacancy rate for Apartment properties was 7.8 percent, down from a 30-year high of 8 percent

By Hui-yong Yu

July 8 (Bloomberg) -- Apartment vacancies in the U.S. dropped in the second quarter from the previous three months, the first quarterly improvement in two years, as private-sector job growth boosted demand for rental housing, Reis Inc. said.

The vacancy rate for apartment properties was 7.8 percent, down from a 30-year high of 8 percent in the first quarter and up from 7.7 percent a year earlier, according to a report today by the real estate research firm. First-quarter vacancies were the highest since 1980, when Reis began tracking the data.

“The apartment sector is on the path towards recovery,” Victor Calanog, director of research at New York-based Reis, said in today’s report.

The U.S. has added 882,000 jobs since the beginning of the year. The country’s unemployment rate fell to 9.5 percent in June from 9.7 percent the previous month, according to a July 2 Labor Department report.

Rental demand usually strengthens in the second and third quarters, when most people lease apartments, Calanog said. The recession interrupted the pattern starting two years ago as widespread job cuts prompted many people to move in with parents or friends instead of renting their own apartments.

The quarterly addition of occupied space, known as net absorption, was the highest in a decade at 44,199 units, Reis said. About 70 percent of the increase came from leasing empty units at existing buildings, according to Reis.

Rents Rise
Landlords’ asking rents rose 0.4 percent from the first quarter and were down 0.7 percent from a year earlier. Effective rents, or what tenants actually paid, climbed 0.7 percent from the prior quarter and were unchanged from a year earlier.

The bigger gains in effective rents relative to asking rents “imply that concession packages are no longer increasing and may in fact be tightening,” Calanog said. Concessions include waiving rent for one or more months to attract tenants.

The increase in rents last quarter came after asking rents fell 2.3 percent in 2009 and effective rents fell 2.9 percent, both records since Reis began compiling the data.

There were still signs of weak demand in the second quarter. More than 29,000 units of new apartment buildings came to market with an average vacancy rate of 57 percent, Reis said.

New York’s second-quarter data “exemplify the uneven nature of the recovery,” Calanog said. The city’s apartment vacancy rate rose to 3 percent from 2.8 percent in the first quarter. Effective rents, meanwhile, climbed 1.4 percent from the previous quarter as New York continued to have one of the lowest apartment vacancy rates in the U.S. The city was second behind New Haven, Connecticut, Reis said.

Compared with a year earlier, apartment rents in New York rose 0.6 percent, after falling 5.6 percent in 2009, Reis said.

A separate report today showed the median rent in Manhattan dropped 3.2 percent in the second quarter from a year earlier. Apartment rentals more than doubled in the period, according to data from appraiser Miller Samuel Inc. and property broker Prudential Douglas Elliman Real Estate.
--Editors: Daniel Taub, Larry Edelman

“The apartment sector is on the path towards recovery"

7.8% vacancy versus 30 year high of 8%

WOW!!!! RALLY!!!