Although the apartment market here in the Piedmont Triad has improved (see here) the market is still softer than the average throughout the rest of the country. According to this story at CoStar the apartment sector is experiencing some exceptionally good times in most US markets:
The current national vacancy rate of 5.9% is 230 basis points below the peak rate and 60 bps below the average rate since 2000. Rents are higher than in the heyday before the housing bust. In the first quarter, rents were 3.6% above their pre-recession high point.
Demand has been very strong for the last three years, with demand outstripping supply by a factor of three in 2010 and 2011, and new leasing activity bested inventory additions by a factor of two, Champion added.
But changes are afoot:
New apartment supply has ramped up quickly and will reach normal historical levels this year for the first time since 2009, when multifamily starts were at their lowest annual level for at least 30 years. The rapid healing of fundamentals in 2010 caught the attention of developers, with starts rising in 2011.
The supply spigot is now open across the country. In the first quarter, more than half the 54 largest metros received more than 1,000 new units over the past four quarters as developers flocked to energy, tech and government focused metros least scathed by the recession, including Texas markets, Seattle, Denver, Raleigh-Durham and Washington, D.C, where employment barely fell due to federal spending.
While the Triad has seen its share of development – Real Data’s most recent report said “new development has been modest…” – it has not been of nearly the scale that other markets like Charlotte and Raleigh have experienced. Despite that slower pace of development, or maybe even because of it, Real Data projects continued improvement for the Triad with vacancies falling from the current 8.3% to 7% and rents growing 3% in the coming year. Does the Triad’s slower growth and less-spectacular-but-still-really-good fundamentals mean it will see less of a dip in a few years when the market cools off? Hard to say, but hopefully this is one of those times when it’s better to be the tortoise than the hare.