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Apartment Vacancy Rate Remains Unchanged, But Promise Lies Ahead

by Natalie Terchek

Reis analysis on apartment vacancy and rental rates show small potential in the second quarter

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In April, we read the first quarter 2013 analysis from Reis and learned the apartment vacancy rate was at the lowest point in a decade, yet rent increases were not as strong as they could be.

It is now the second quarter, and Reis came out with a new analysis. There is not much change from last quarter, but the small change we see looks promising for the future.

Reis Apartment Analysis – At Home and Abroad

Here are some of the highlights from the latest report:

  • Apartment vacancy remains at 4.3 percent, the same as first quarter. This is the first time since the first quarter of 2010 that the quarterly vacancy rate has not fallen. Over the last four quarters, national vacancies declined by 50 basis points, a bit slower than last quarter’s year‐over‐year decline in vacancy of 70 basis points. However, this does not come as a surprise to Reis. As the housing market gets tighter, it becomes more difficult for vacancy to continue falling at a high rate as vacant units disappear from the market.
  • The sector absorbed 31,973 units, up just slightly from the 31,319 units from first quarter. So far, more units have been absorbed in 2013 than through this point a year ago. However, new construction seems to be picking up, so this could be the front end of a wave of new supply expected to come online over the next few years.
  • Asking and effective rents increased by 0.6 percent and 0.7 percent, respectively, slightly up from the first quarter, when asking and effective rents increased by 0.5 percent and 0.6 percent. However, Reis data shows that rent growth has been very slow for the past few quarters (it reached its highest at 0.8 percent at the end of 2009, and continued to decrease ever since, with a small spike in 2012), so we should not expect dramatic changes anytime soon.

This quarter, Reis mentioned in their latest analysis that apartment vacancy rate for Chicago was relatively the same at 3.6 percent, down 0.1 percent from last quarter and down 0.5 percent from last year. However, the average effective rent was $1,058.01, increasing 0.6 percent from last quarter and 2.5 percent from last year.

“The apartment market has been on a spectacular run,” said Ryan Severino, senior economist for Reis, as reported by The Chicago Tribune. “It’s been an awesome recovery since early 2010.”

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