From yesterday's Calculated Risk, here is a post discussing the first drop in office vacancy rates since 2007. Reis Inc's quarterly survey on office properties shows that the national vacancy rates at the end of the first quarter 2011 stood at 17.5%. The decrease was only .1% from 2010's fourth quarter, but after the last four years I will take any positive move. Below is a chart from the post showing quarterly vacancies since 1991:
Today Calculated Risk has a post on Ries' quarterly apartment report, which shows vacancies at a three year low. The vacancy rate is 6.2%, down from 8% a year ago. Much of the drop in vacancy has come from the elimination of concessions. Here is Calculated Risk's analysis on the drop in vacancies:
This is a very large decline from the record vacancy rate set a year ago at 8%. This decline fits with the recent survey from the NMHC that showed lower apartment vacancies. Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere.
A few key points we've been discussing:
• Vacancy rates are falling fast (the excess supply is being absorbed). Note: The excess housing supply includes both apartments and single family homes.
• A record low number of multi-family units will be completed this year (2011). Only 6,000 apartments came on the market in Q1 (in the Reis survey area).
• This will push up effective rents. Via Bloomberg:
Effective rents, or what tenants actually pay, increased in 75 of the 82 markets Reis tracks, to an average $991 a month from $967 a year earlier and $986 in the fourth quarter.However, when I was at the NMHC conference earlier this year, it sounded like rent growth is mostly coming from reductions in concessions and not from the top line (i.e. not from rent increases). (my short notes from conference here and here). Still, any increase in effective rents will push down the price-to-rent ratio for homes.
• Multi-family starts are increasing, and that will help both GDP and employment growth this year. These new starts will not be completed until 2012 at the earliest, so vacancy rates will probably decline all year.