Valley Apartment Vacancies Fall Below 10% for the First Time since 1Q07
Valley apartment vacancy rates have fallen under 10% for the first time since first quarter 2007 (1Q07). Overall, rent rates have declined significantly since 2008 and have remained relatively flat over the past year.
The North Scottsdale submarket comprises mainly Class ‘A’ properties and rents have increased $37 from first quarter 2010 to first quarter 2011 while area vacancies fell to 5 percent. In contrast, the Central Black Canyon submarket, a Class ‘C’ apartment market saw no rent increase over the past year while vacancies stood at 21 percent, the Valley’s highest, during first quarter 2011. In the past year, the Valley has seen concessions continue to fall. In first quarter 2011, area concessions were at 77 percent, compared to 85 percent in first quarter 2010.
Valley vacancies peaked in second quarter 2009 at 15.7 percent. Area job losses, an oversupply of new apartments and the housing crisis all combined to fuel high apartment vacancy rates. During 2008 and 2009, the Phoenix area added 13,423 new apartment units. In 2010 there were 696 units added. As new construction decreased in tandem with improving economic conditions, the vacancy rate dropped. The lack of new construction was also a significant component to the lower vacancy rates. As of first quarter 2011, there were 1,031 new apartment units scheduled-for or under construction. In first quarter 2008, there were 9,129 units scheduled for or under construction.
Pete TeKampe, Vice President Investments at Marcus & Millichap explains his process for data collection and analysis, “Our team collects eviction filings each day, throughout the day. It’s an arduous and extremely detailed process but the people we advise have found this information to be an indispensable component of their investment strategies. It’s like having the other team’s playbook. For the past year, we have seen eviction filings steadily rising. Eviction filings are the most reliable indicator of near-term asking rent increases and decreases. This information has been extremely reliable in forecasting revenue
streams for the multifamily industry as well as for an individual asset or for a group of assets in the marketplace. When evictions rise, rents rise in the next 90 days. You can set your watch by it.”
So far in 2011, through April 30, evictions are up compared to last year (same timeframe) by 5.4%. “It’
According to TeKampe’s research, the North Scottsdale submarket recorded the highest rents in the metro area at $960 in first quarter 2011, up from $923 in first quarter 2010. However, eleven out of thirty submarkets recorded rents that were lower or unchanged from one year ago. In addition the Central Valley submarket saw area average rents increase $117 from one year earlier. Area vacancies were 10.7 percent compared to 11.2 percent one year ago. The rent increase is mainly due to previously constructed units which were intended to be owner-occupied units and subsequently being placed in the rental housing stock. This product is at the higher end of the scale and tends to pull up submarket averages. The lowest rental rates are in West Central Phoenix at $553. This is lower than the $555 average observed in the area one year ago. The highest vacancy rates are in Central Black Canyon submarket at 21 percent and the lowest vacancy rates occurred in Ahwatukee at 4.5%. The monthly publication Apartment News will offer more complete data and analysis in the June issue from Pete TeKampe.
About Arizona Multihousing Association:
The Arizona Multihousing Association, the rental housing industry’s statewide association represents ethical rental housing providers in legislative, legal and regulatory matters. They provide services, products, educational programs and networking opportunities to enhance the general welfare and economic health of all our members. In partnership with national associations, the AMA cultivates opportunities for quality rental housing throughout Arizona. More than 2,000 members around Arizona are actively engaged in this organization.
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The Arizona Multihousing Association, the rental housing industry’s statewide association, represents ethical rental housing providers in legislative, legal and regulatory matters. They provide services, products, educational programs and networking.