Commercial real estate data firm Reis reported Oct. 3 that interest in the multifamily segment may be waning just as quickly as it spiked following the housing crisis, HousingWire reported. The Reis report cited a low apartment absorption rate and a very small drop in the third quarter vacancy rate.
Renters only absorbed 22,615 apartments in the third quarter, down from 31,014 in the second quarter and 36,423 in the first quarter.
The multifamily vacancy rate has been falling steadily as more homeowners turned to rentals, but since the rate failed to make any significant drop during the third quarter, Reis noted that there appeared to be a drop in multifamily demand, HousingWire reported.
On average, multifamily vacancies in 2010 and 2011 fell by 35 basis points, but in 2012, they fell just 30 basis points on average. The second quarter brought a 20 basis-point drop in vacancies followed by a 10 basis-point drop during the third quarter. This rate of improvement is the lowest since the recovery began in early 2010, HousingWire reported.
However, despite the decline, demand for apartments still is greater than supply, but with numerous multifamily projects scheduled for delivery next year, the dip in demand could prove problematic, HousingWire reported. Although the issue is not cause for immediate alarm, Reis noted the marketplace should be aware of potential changes.
“Landlord revenues will still be healthy, with effective rent growth expected to be around 3 percent over the next few years,” Reis stated in its report, HousingWire reported. “However, it will be wise to temper the most optimistic forecasts for investment returns, even for this superstar property type.”
However, mortgage lender Prudential Mortgage Capital Co. reportedly is still very optimistic about the multifamily market. In September the firm expanded its multifamily lending program with the expectation that multifamily development would continue to gain momentum.