RealFacts, a company that tracks multifamily housing community data, reported this week that overall occupancy of apartment communities in its database declined 0.5 percent during the fourth quarter of 2005.
The decline translates to an additional 16,780 empty units at the end of the quarter.
The decline was seen across all markets and regions, with a few exceptions in smaller metropolitan areas, the company announced. This markets the first significant decline in eight quarters – since the first quarter of 2004, when the national economy was first showing signs of improvement, the company reported. “Historically, declines in occupancy often precede declines in rent.”
Major metropolitan areas reporting significant quarterly declines include Riverside-San Bernardino, Calif., -2.7 percent; Dallas-Ft Worth-Arlington, Texas, -0.9 percent; Denver-Aurora, Colo., -1.1 percent; and Tampa-St Petersburg-Clearwater, Fla., -1.2 percent.
Every Southern California metropolitan area tracked by RealFacts showed a decline in occupancy, with Santa-Barbara-Santa Maria-Goleta declining the most at -3.6 percent. Eight of 11 Texas metropolitan areas showed declines, Houston-Baytown-Sugar Land being the only major Texas metropolitan area showing an increase of 0.1 percent.
Rents showed a quarterly increase of 0.6 percent for all apartment communities in the database, with an annual increase of 3.4 percent.
Southern California reported increases across the board with Riverside-San Bernardino leading the way with an annual rent increase of 7.3 percent, and Los Angeles-Long-Beach-Santa Ana next with 6.6 percent.
Other major metropolitan areas showing increases were Las Vegas with 6 percent and Phoenix with 5.1 percent. “The average annual 3.4 percent rent increase indicates an anemic market not close to the rent increase rates of 5 to 6 percent that investors traditionally expected. Only major (metro areas), and areas with high barriers to entry such as Southern California, are regularly providing such returns,” RealFacts reported.
Occupancy declines can be indicative of condominium conversions, according to the announcement and the construction of new rental apartment communities in the lease-up phase.
The San Diego-Carlsbad-San Marcos metropolitan area, for example, had occupancy declines of -0.5 percent for the quarter and -0.3 percent annually, which may be due, in part, to condominium conversion projects, Real Facts noted. And the Riverside-San Bernardino metropolitan area added nine rental apartment communities with 2,402 units during 2005.
Also, RealFacts reported that the boom in single-family home purchases may be impacting rental apartment occupancy rates.
The RealFacts database includes over 11,450 investment grade, market-rate rental communities of 100 units or larger. RealFacts surveys every community in the database every quarter for current rent and occupancy levels.
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