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National Apartment Vacancy Rate Increases, New Supply in Pipeline
The apartment market continued to face pressure from added supply in the fourth quarter, as the national vacancy rate increased 10 basis points to 4.5% in the quarter, according to Reis’ Q4 2017 multifamily market report. Vacancies have more or less been on an upward march since the middle of 2016, with vacancy increases in 50 of the 79 metros tracked by Reis.
Asking rents increased 0.4% in the fourth quarter, while effective rents grew 0.3%. Over the year, asking rents increased 3.9% while effective rents grew by 3.3%.
Reis’ Chief Economist Victor Calanog notes, these growth rates reflect a deceleration in apartment market fundamentals compared to recent years, due in part to the large amount of new supply coming online. New construction totaled 43,769 units in Q4, raising the year-end total to 213,802 units. The national apartment market has not seen new completions in excess of 200,000 since 1986.
New York, Washington, DC, Los Angeles, Dallas, Chicago, and other major markets are still expecting to see a significant amount of new construction in 2018. While Reis expects a significant decline in inventory growth starting in 2019, projects slated for completion will continue over at least the next 12 months, and vacancies will rise accordingly before tapering off in 2019.
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