Apartment Demand Soars, Rents Constrained

Apartment vacancies fell by 10 basis points in the third quarter to 4.2 percent, according to a preliminary look of the ReisReports third-quarter market report for the apartment, office, and retail sectors. Asking rents increased by 0.9 percent in the third quarter. But the high demand won't automatically mean rent increases.

“Despite the persistent strength of the apartment market recovery, rent growth is being held in check by a still-weak recovery in the economy and the labor market,” according to ReisReports. “Too few jobs, many of dubious quality, and too little income growth are constraining landlords’ ability to raise rents.”

The office sector also posted declines in vacancies, falling by 10 basis points in the third quarter to 16.9 percent. The struggle in the labor market continues to constrain demand for office space, the report notes.

Meanwhile, Reis data backed up recent media reports of a sluggish recovery in the retail sector. Vacancies for neighborhood and community shopping centers were at 10.5 percent in the third quarter, falling 30 basis points year-over-year.

“Neighborhood and community center rents lost a lot of ground given the severity of the recession and the sluggish recovery,” the report notes.

Some submarkets in retail are showing signs of growth, but they tend to be insulated in wealthy neighborhoods. Other neighborhoods are still facing empty, older spaces from businesses that closed or moved elsewhere.

In general, malls are posting a stronger recovery than shopping centers. National vacancies in shopping malls are falling at a faster pace than neighborhood and community shopping centers, Reis reports. Mall vacancies stood at 8.2 percent in the third quarter, dropping 10 basis points from the second quarter.

ReisReports will officially publish its quarterly market report for the third quarter Nov. 1.

Source: Reis