Two Tough Years (Nevermind, If You're in El Paso)

Across the 64 markets that form the core of MPF Research's U.S. apartment sector analysis, revenues have come down an average of 7.7 percent since the period of national job loss kicked in at the beginning of 2008. This change is calculated looking at the shift in occupancy as well as the movement of effective rents for new leases. Typical revenues faltered by 4.4 percent during calendar 2009, with nearly all of that loss focused on rent cuts. The decline during calendar 2008 was at 3.3 percent, registering mainly in the form of dropping occupancy.

Examining change on the metro level, by far the biggest winner across the country over the past two years was El Paso, where revenues actually climbed meaningfully - rising 5.2 percent. Separating El Paso from the pack, Fort Bliss is in the midst of expansion that is directly bringing about 15,000 jobs to the metro and indirectly is creating spin-off support positions needed to serve the additional populace. (Keep in mind that job info from the Bureau of Labor Statistics excludes active-duty military personnel. Thus, while the BLS is showing that El Paso lost about 4,000 positions during the past two years, the total employment count in actuality experienced a sizable bump.

Pittsburgh was the one additional market across the country where the change in apartment revenues stayed in positive territory during the 2008-2009 time span. A mild rise of 0.8 percent registered there.

Other metros that ranked as national top 10 apartment revenue change performers in 2008-2009 all suffered losses, but the downturns were held to no more than 2 percent. Baltimore and Washington, DC are the two particularly large markets making the grade. Albuquerque, Cincinnati, Dayton, Norfolk, Oklahoma City and Louisville - pretty small markets - complete the list of metros registering total losses in revenues of less than 2 percent over the past couple of years.

Moving to the bottom tier of performances, apartment revenues plunged by 17.7 percent during 2008-2009 in Phoenix, and the loss in Las Vegas proved almost as drastic at 17.2 percent. Declines in the range of about 11 percent to 14 percent were recorded across San Jose, Seattle, Atlanta, Los Angeles, Salt Lake City, Riverside, Charlotte and Austin.

Austin is the interesting outlier in that worst-of-the-worst group. Unlike the rest of the markets on the list, Austin actually can boast a few more jobs today than the metro had at the end of 2007. In turn, apartment demand has proved meaningful, registering at about 7,300 units over the two-year period. Austin's struggles reflect that roughly 18,400 new apartments were constructed in 2008-2009, with this overbuilding pushing up the metro's total inventory by a phenomenal 11.7 percent.

With ongoing construction in Austin down to about 2,600 units and the metro absorbing apartments at a rapid pace, the market appears to be unique among the bottom-tier performers in its potential to realize dramatic recovery comparatively quickly. While Austin might not quite make the list of the nation's top 10 markets for revenue change in calendar 2010, it seems almost sure to be near the forefront by 2011.

A portion of the data used in this post is acquired through property management software, which provides property owners and managers the ability to report baseline statistics to county recorder's offices, news publications, and other

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