Apartment vacancy rate dips below symbolic level

Owners and operators of Phoenix-area apartment communities reached a significant milestone - at least psychologically - in the first quarter, when the overall vacancy rate dropped below 10 percent for the first time in four years, according to a local real-estate broker who specializes in multifamily housing.

Pete TeKampe, vice president of investments at Marcus & Millichap in Phoenix, said the Valley's first-quarter vacancy rate of 9.9 percent marks the first time local apartment communities have been more than 90 percent occupied since the first quarter of 2007, when the vacancy rate was 9.6 percent.

That statistic does not include single-family homes for rent, which are practically impossible to track, he said.

In the months that followed, the vacancy rate started to climb rapidly as a flurry of new apartment products began to outstrip the growth in demand for rentals.

Layoffs, increased fuel prices, crackdowns on illegal immigrants and other factors then exacerbated the rising vacancy rate, TeKamp said, which reached a peak of 15.7 percent in the second quarter of 2009.

"That's the highest that we've ever experienced as an industry," he said.

By the first quarter of 2010, the vacancy rate had begun to swing downward, spurred by thousands of single-family-home foreclosures and the almost total absence of apartment construction.

While there were 1,031 rental units added to the Phoenix-area market in the first quarter, the majority of them were from failed condo projects that had been purchased and reopened as apartments, TeKamp said. By comparison, more than 9,000 new apartment units came online in the first quarter of 2008, he said.

The vacancy rate in the first quarter of 2010 was 13.5 percent, and things have continued to improve each quarter.

TeKamp said the significance of 9.9 percent was more symbolic than practical, and he cautioned apartment owner-operators not to get too carried away with thinking it must be time to raise the rent.

by J. Craig AndersonThe Arizona Republic May. 8, 2011 12:00 AM




Apartment vacancy rate dips below symbolic level