The national apartment market showed added resolve during the third quarter, posting lower vacancies and higher rents. According to New York-based research firm Reis Inc., national vacancy fell to 5.9% at the end of September versus 6.4% at midyear. Effective rents also increased by 1.2% during the third quarter—a strong showing given that the second quarter saw a 0.6% increase in effective rents (rents minus concessions). The Reis data covers the nation’s 70 largest apartment markets, making it one of the most comprehensive surveys of the national market.
Steady job growth and rampant condo conversion activity have bolstered the apartment market over the past 12 months. This dynamic has lured new renters into a market that continues to loose inventory and a shallower supply pool can magnify even mediocre rental demand.
The one variable, however, is whether these new condo units will remain on the for-sale market. Real estate economists fear that a glut of condo units could meet with stale demand, forcing owners and developers to rent out these units rather than seek buyers. Such an outcome could flood the market with newer, more amenity-laden apartment units that could challenge Class B apartment landlords with older product. It could also put pressure on Class A owners seeking to draw the top-end tenants, known as renters-by-choice.