Apartment News Update: Good News for the Rental Market

A new report from the Commerce Department showed that residential construction increased in January, driven by a 9.2 percent increase in new apartment and multifamily developments. Total construction, which includes both single and multifamily projects, rose just 2.8 percent. [Wall Street Journal, subscription]

This is an encouraging start to the year as in 2009 new multifamily starts fell 58 percent to 92,000 units and vacancy rates soared to an all time high of 8 percent.

One company that is contributing to the new starts is AvalonBay Communities, Inc., which recently announced a plan to invest around $400 million into some cities with lower than average vacancy rates. AvalonBay hopes to use the revenue from more profitable years to get a head start on the competition by targeting regions that have the highest growth potential and taking advantage of depressed construction costs. [BusinessWeek]

Home Sales Helping Apartment Demand?

Today's Market Dynamics newsletter from MPF research highlighted two regions that witnessed surprising apartment demand, Orlando and the Inland Empire. Although the regions both posted significant job loss figures for 2009, demand in the same year for apartments remained high due to drastic reductions in shadow market inventory.

Mr. Willett, of MPF Research concludes that demand for apartments in Orlando and in the Inland Empire was tied to an increase in home sales, which shot up 61 and 26 percent, respectively. Since no new jobs were added, the increase in demand for apartments was not from people moving to the area or moving out of their homes, but from a reduction in their options. As homes for rent and condos are sold, renters looked for better deals on apartments for rent in those areas.