Apartment vacancies in the US have has risen due to the construction outpour in expensive urban areas in US cities in last quarter of 2015. Reis Inc. says that the construction surge overshadowed the demand for older properties in the suburbs.
Within the months of October until December the national vacancy rate rose up to 4.4 percent, reported last Tuesday by a research company in New York. Apartment vacancies increased for the second straight quarter. The last time an event like this occurred was in 2009.
There is a greater demand for older and less expensive apartments located apartments in the suburbs. Because of this demand, the new and expensive urban apartments are left unleased. Reis inc senior economist Ryan Severino says, "Vacancies are rising predominantly because a lot of shiny, sexy new Class A projects are having a harder time leasing up relative to a few years ago."
Reis compared the vacancy rate of Class A apartments and Class B and C apartments to confirm whether the rise of vacancy rate in apartments are rising in general. Statistics show that Class B and Class C properties are showing positive decrease in vacancy rate. In the third quarter of 2015, the Class C and Class B properties have a collective vacancy percentage of 3.2 percent. This is a reasonable decrease compared to its 4.3 percent vacancy rate in 2012. Class A properties, however, has shown an increase from 4.6 percent to 5.7 percent in the same period.
Some investors are starting to move from developing Class A properties to renovating Class B properties which TruAmerica Multifamily CEO Robert Hart defines as "most recession-proof and it's not as susceptible to increases in supply."
Severino predicts a slight decrease in the rate of rent increase this year among Class A properties saying, "Eventually, rising vacancy rates will take the wind out of landlords' sails and remove some of their ability to keep pushing rent growth at such a febrile pace."
