Recent apartment data appear even hotter nationwide than July’s temperatures. Yes, much of the country experienced brutally hot days and record-setting heat last month, but even that won’t prevent me from sharing a sunny forecast for our industry based on the second-quarter statistics provided by industry research analysts in our “Mid-Year Apartment Report,” which begins on page 36.
“The apartment market is now on pace for calendar 2010 demand to come in at the second strongest annual volume seen over the past couple of decades, exceeded only when Hurricane Katrina evacuees boosted the absorption tally in 2005,” writes Greg Willett from MPF Research.
“Q2 data show that the apartment sector is on the path towards recovery. Vacancies fell for the first time in two years (from 8 percent to 7.8 percent) as net absorption surged by 44,199 units, the largest net positive addition to occupied stock on record in 10 years.
Approximately 70 percent of this addition to occupied stock came from existing buildings leasing up empty units,” reports Reis.
Our industry is in position to lead commercial real estate out of the current slump, or as some put it, “The Great Recession.” Details about the second quarter’s vacancy rates and effective rents are encouraging.
This issue of units also includes the executive summary of NAA’s annual Survey of Operating Income & Expenses in Rental Apartment Communities, calculated by Chris Lee at CEL & Associates. It’s exciting that a record number of communities and units participated this year. The survey is a great way for apartment professionals to prepare their 2011 operating budgets. The survey offers a cost breakdown based on metropolitan areas, giving you the chance to measure yourself against local competitors.
In “Performance Counts During A Period Of Rebound,” on page 59, Lee writes that over the past 12 months, the apartment industry has faced some of its greatest operating challenges in decades. “It did not matter whether the owner or operator was a public or private company, a large or small organization, or based in any particular region of the country; the impact of the economic downturn, historically high level of unemployment, lack of meaningful job creation, declining rents, and significant declines in both transaction volume and asset values placed a greater emphasis on operation performance and bottom line metrics,” he writes.
“However, the challenges over the past year appear to be “bottoming out” for the multifamily sector, and there are signs that over the next 12 to 36 months, there will be significant improvement in operating performance. The focus of managing apartment buildings has shifted to managing apartment communities--with more emphasis on meeting and exceeding resident expectations. Rents are beginning to rise, concessions are slowly declining, investor interest has increased and a renewed emphasis on managing the bottom line at the property and portfolio level is underway. The apartment industry is clearly entering a period of improved fundamentals and in this time of rebound, sustained diligence in operations is required to produce the expected bottom line results.”
Knowing that, we’ll all be able to enjoy our summer vacations a bit more.
— NAA Chairman of the Board Marc Rosenwasser, CAPS