Over the last few years the U.S. apartment market achieved notable success in a struggling economy. With the addition of “Echo Boomers” entering the workforce, the apartment sector looks to continue the positive market trend in the future. These were some of the observations shared by guests on a recent episode of the national talk radio station, the “Commercial Real Estate Show.” Occupancy rates, future development locations and rent growth were a few of the market topics discussed.
The national apartment occupancy rate last year was 93.5 percent and according to Ronald G. Johnsey, president of AxioMetrics Inc., the 2012 rate should reach 95 percent. Johnsey added that 2011 saw apartment rents grow by 4.1 percent and will be expected to hit 5.5 percent in 2012. Compared to Class A and B apartments, Class C apartments have not experienced the same growth rate, but this is expected to change. “This year we’re going to fill in Class C,” said Johnsey. “We’re going to see the occupancy rates in all classes get closer to 95 percent, and that’s going to create really strong pricing power.”
Echo Boomers refer to those born in the 1980s and early 1990s. Their addition to the rental pool is why Johnsey feels the road ahead for the apartment sector looks bright. Echo Boomers are currently getting married late and usually have quite a bit of college debt. These two factors alone diminish the possibility of home ownership, thus contributing to the rise of apartment rentals.
According to Doug Culkin, president of the National Apartment Association, 2013 and 2014 should see a noticeable increase in development. Apartment developers are looking for land on both the East and West Coasts, and even plan on targeting college towns where empty nesters seek a bit of culture. Ernie Eden, a senor vice president in Bull Realty Apartment Group says that developers have made “a real move to quality” regarding locations. “If you’ve got a great location, there’s all sorts of interest on the part of developers.”
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