No, it’s not 2012 yet. But a new forecast for the year ahead predicts continuing gains in the rental market.
Good news, everyone! Marcus and Millichap Research Services have put out their annual Economic and Apartment Outlook. As expected, things are still looking up for the rental market, and should remain strong throughout the new year.
First, some context. While the US economy isn’t exactly robust at the moment, we can safely assume that we will avoid recession in the coming year. Marcus and Millichap came to this conclusion due to several factors. Exports are currently strong, and corporate profits are good–higher than 2006. We also have retail sales that are stronger than they were even before the recession.
While unemployment is still fairly high, there is promising job growth in the private sector (24% of the jobs lost in the recession have been restored), and “all expectations point toward business investment to propel the economy through the doldrums,” despite the obvious challenges.
Those challenges include an uncertain economic forecast in Europe, a stable but lower-than-average GDP of around 1.8% (forecasted to increase slightly next year), and the continuing vulnerability of the residential sector. But hey, that vulnerable residential sector–that’s where apartments come in for the win.
According to Marcus and Millichap, the rental sector has entered a full expansion cycle. There was solid growth in the rental market throughout the third quarter, despite the relatively weak GDP, and apartments have posted “universal gains in net absorption” this year, (meaning, of course, that more total square feet has been leased than vacated–see a full definition of net absorption here).
As we know, the uncertainty of the economy over the past few years has caused a profound shift in the way people think about where and how they want to live; and as home ownership has been hit hard by foreclosures, lack of available credit, etc., the rental market has become increasingly robust.
Based on the numbers, this rental momentum will continue through 2012. Third-quarter vacancy was 5.6%, a decline from quarter two, while asking and effective rents posted gains this year of 2.1% and 2.4%, respectively. This may be at least partially due to the fact that 68% of recorded job gains since the end of the recession (that was June 2009) have been by displaced homeowners and people ages 20-34 who are forming new households.
Renting is simply a more viable option these days for many people, professionals and families alike–and that’s not a trend that will be changing any time soon. Cheers to the year ahead!
Marcus and Millichap’s full forecast can be read here.