2007 National Apartment Research

Marcus & Millichap has published their 2007 National Apartment Research study. If you own an apartment building or are considering purchasing one, this is an excellent resource.

Read the entire report online

Here are some highlights:

1. New York climbed four spots to #1 in the 2007 National Apartment Index (NAI), pushing last year’s leader Orange County to #2. Below-average vacancy rates and strong rent growth in both markets will continue to be supported by low for-sale housing affordability.

2. Tech markets gained the most ground in this year’s index. Seattle (#7) and San Francisco (#8) each rose eight spots to make their way into this year’s top 10. Though falling outside the top 10 list, San Jose (#12) and Austin (#16) both climbed seven positions.

3. Markets that registered the greatest supply reductions due to conversions are now facing the greatest risk from the return of condos to the rental pool. However, many of the top conversion markets, including Las Vegas (#4), Fort Lauderdale (#6) and Phoenix (#10), also boast some of the strongest forecasts for employment and population growth.

4. The slowdown in the housing market has led to the return of condos to the rental pool, but a temporary increase in competitive stock is not expected to have a significant impact on apartment vacancy. By year-end 2007, overall vacancy is projected to improve 20 basis points to 5.1 percent, compared with a 40 basis point decline in 2006.

5. Approximately 92,000 units are expected to be completed in 2007, up from 90,000 apartments last year. While this year’s total could come in above expectations if a large number of condo projects come online as rentals, completions would nonetheless fall below levels reported in the 1990s through 2003.

6. Asking rents are forecast to rise 4.3 percent, while effective rents advance 4.8 percent. Concessions have declined dramatically in many markets over the past two years, leaving less room for improvement in 2007.