US apartment rents rise in first quarter

US apartment rents rise in first quarter
By Alan Rappeport in Washington
Copyright The Financial Times Limited 2010
Published: April 6 2010 06:07 | Last updated: April 6 2010 06:07
http://www.ft.com/cms/s/0/1f1934b2-4100-11df-94c2-00144feabdc0.html


Rents for US apartments rose in the first three months of the year after five quarters of record declines, offering hope that a key sector of the commercial property market is turning round.

Rent prices picked up by 0.1 per cent from January through March after falling by a record 2.3 per cent last year, according to new data from Reis, a property research company.

That the increase came during the traditionally dormant winter months is a sign that landlords have started holding back on the aggressive bargains they were offering to lure tenants. “Effective” rents, which include special deals such as additional months on a lease without fees, outpaced asking rents, rising by 0.3 per cent.

“The faster pace of effective rent increases versus asking rents imply that concession packages are no longer increasing and may in fact be tightening,” said Victor Calanog, director of research at Reis.

Although Reis characterised the figures as “robust” and pointed to a “surprising show of resilience” in the apartment sector, it noted that new buildings are coming on to the market more than half empty and that vacancy rates did rise in 30 of the 79 markets that it tracks. However, the vacancy rate remained flat at 8 per cent during the quarter.

“The apartment sector may have indeed hit the bottom of the current business cycle and may be on the path towards recovery,” Mr Calanog said.

Apartments still face headwinds, with unemployment at 9.7 per cent and foreclosure activity expected to accelerate this year. One factor that might help is the ongoing volatility in the market for homebuyers due to shifts in government stimulus measures, which have turned renters into buyers.

“In many ways the expiration of the tax credit in the second half of this year is a positive development for the multi-unit housing rental market,” said Jonathan Miller, chief executive of Miller Samuel, a real estate appraisal company.

The slide in rents in New York City, the most competitive apartment rental market in the US, also reversed course in the first quarter, with rates rising by 0.9 per cent after falling by 2.9 per cent in 2009. Of the 79 cities that Reis tracks, 60 saw effective rents rise, with Miami gaining 1.6 per cent to lead the pack.

“I would say things are definitely going quicker now,” said Peter Sommer, a broker and sales associate with Halstead Property in New York. “A lot of these Wall Street firms abated their hiring freezes and people are coming to the city again.”