In his Summer 2010 Apartment Report, Mark D. Barry’s latest report predicts:
- Income will remain flat
- Some increases in utility expenses
- Vacancies will hold around 5%
- Values will remain stable
- The next two years will experience a better sales environment
- Permits for only 600 to 800 new apartments will be issued in 2010
Vacancies & 2012 Shortage
Barry expects that the rest of 2010 will be “…a year to concentrate on keeping your tenants happy, and holding on to what you have.” He predicts that apartment vacancies should fall between 4.75%-5.25% and says the close-in urban market will remain in balance with higher vacancies concentrated in more expensive units and more outlying suburban areas. And, over the next couple of years, Barry says apartment vacancies will “rebound quickly” as the economy turns around and expects an apartment shortage by 2012.
Apartment values are anticipated to remain stable for the balance of 2010 due to low interest rates and stable income despite some increasing expenses. Typical cap rates of 6.50% to 7.75% for suburban properties and 6.00% to 7.25% for urban properties.
“The next two years will be a far better environment for apartment sales. This will be due to many owners getting better educated on values, some capitulation on the part of sellers, motivated sellers who need the funds, seller motivated by possible increases in capital gains, and buyers who sense that we are close to a bottom.”