Michael Cunningham's Blog

More and more apartment owners and property managers are turning to document management systems to control the paper flow and streamline and improve their business processes. These systems not only manage electronic bills, contracts, and invoices, but also create an electronic library of documents once they’ve been scanned into the system.

But after you’ve made the move to an electronic document management system, how do you properly dispose of all the information that has occupied file folders, filled storage boxes, packed file cabinets, and otherwise cluttered up your desk?

One of the most encouraging results seen in the country's apartment market during 2010's first half was a notable upturn in demand for middle-tier product. Previously, almost all the absorption occurring across the country was being captured at the very top end of the market, reflecting new completions moving through initial lease-up as well as high-end units attracting move-up renters via price cuts.

Looking specifically at 1980s-generation developments, the middle of the product spectrum in most metros, occupancy across the nation as a whole climbed 2 percentage points during 2010's initial six months, improving from 91.7 percent to 93.7 percent. At least a little bit of growth occurred virtually everywhere, and the jump was more than 3 percentage points in select areas like Upstate South Carolina's Greenville area, San Antonio, Kansas City and Nashville.

An especially interesting shift in 1980s-era apartment occupancy registered during recent months in metro Atlanta. While those units were just 91.3 percent occupied as of mid-2010, the performance in the sector improved by 2.9 percentage points from the late 2009 result. Making the change especially intriguing, almost all the upturn occurred in just a few neighborhoods, specifically the arc stretching from Gwinnett County across the Roswell/Alpharetta area and into eastern Cobb County. That's a cluster of product that on the surface would seem to face a particularly difficult road to recovery, since it lies amid a huge selection of now really, really cheap single-family homes offered both for sale and for lease in very large numbers.

While metro Washington, DC seems to rank at the top of the list of just about everyone's favorite apartment markets, current performance stats actually are a little stronger in adjacent Baltimore.

June's occupancy rate in Baltimore's base of about 190,000 apartments stood at an even 96 percent, up 2.1 percentage points from the late 2009 figure and 0.7 points ahead of occupancy in Washington, DC. Neighborhood-level occupancy was right around the 95 percent mark in even the weakest of Baltimore's individual submarkets, and the rate was 97 percent or better in Ellicott City/Columbia and the Towson area.

Just like pretty much every other metro across the country, Jacksonville has seen its apartment market generate some performance momentum so far during 2010. However, this locale took one of the nation's worst beatings during the down portion of the market cycle, so it remains far from reaching healthy status once again.

Apartment absorption in Jacksonville registered at some 2,900 units during 2010's initial six months, far surpassing completions limited to around 500 apartments. Occupancy, then, has made big strides, rising 3 full percentage points since late 2009. Even with that upturn, however, the June occupancy figure was only 89.3 percent. That's the third worst reading across the 64 metros that form the core of MPF Research's national apartment analysis, coming in just ahead of the rates in Houston and Fort Myers.

With overall occupancy so low, it's not surprising that even the top-performing neighborhoods and product niches are struggling. The metro's best neighborhood-level result in submarkets with sizable apartment inventories is the 92.8 percent occupancy in the Mandarin area. Across the various product categories, 1990s-era properties are doing the best with occupancy at 92.5 percent.

Yesterday, there was lots of media coverage highlighting results of a survey that indicates quite a few of today's renters don't expect to ever become home buyers. Specifically, a Harris Interactive poll of about 2,000 folks conducted for real estate search site Trulia.com found that 27 percent of current renters don't anticipate that they'll eventually make the leap to home purchase.

Looking a little more closely at the survey info provided on Trulia's website, only 663 of the 2,000 people surveyed actually are renters, and there's no info provided on what type of housing (apartments, single-family homes, or something else) the renters are leasing. That seems like a pretty small sample to use when making broad-brush statements about a large and diverse group of renters, but let's go ahead and assume that the survey results are accurate. Do they, in fact, mean anything?

While 2nd quarter 2010's 1.2 percent jump in U.S. apartment rents was the first meaningful increase in pricing power seen during the current market cycle, the boost was encouraging widespread. It wasn't just a handful of areas getting back on track ... at least minor upticks occurred almost everywhere.

Across the 64 metros that form the core of MPF Research's apartment market analysis, 56 of them realized effective rent improvement during 2nd quarter, measuring change on a same-store basis. One city (Memphis) registered identical rents in March and June, leaving just seven metros suffering further declines. Quarterly losses of more than 1 percent were limited to Tucson, Las Vegas and New Orleans.

The strong quarterly showing pushed annual rent change into positive territory for a total of 25 metros as of June, up from just seven as of 1st quarter. The nation's top 10 performers for rent growth proved to be an incredibly mixed bunch in terms of general characteristics. They stretched from the East Coast to the West Coast. Some were large, others small. A few maintained their momentum after doing reasonably well during the national downturn, whereas others regained considerable ground that was lost during 2008-2009.

While almost every apartment market across the country has posted notably improved overall fundamentals during 2010, few can match the turnaround seen in Portland. The metro's stats looks good for both occupancy and rent change. And, perhaps most impressive of all, recovery is apparent in every single product niche across every single neighborhood.

Nashville ranks among the U.S. apartment markets recording the most pronounced upturns in performance during 2010. Demand is coming in at very strong levels that well exceed deliveries, driving up occupancy quite rapidly and, in turn, stimulating rent growth.

MPF Research's calculations show Nashville apartment absorption during the January-June 2010 time frame at nearly 4,200 units, compared to roughly 1,000 units of new supply. Apartment demand in Music City perhaps was boosted a bit by flooding that damaged a portion of the total housing stock in May, but the impact doesn't appear to be especially significant. Pointing to that result, apartment demand during the first half of 2010 proved substantial throughout the metro, not just in the neighborhoods where flooding occurred.

Nashville's overall occupancy rate for apartments now has reached 94 percent, up 3.1 percentage points since bottoming at the end of 2009. Notable progress is occurring in all key submarkets except Sumner County, on the metro's far northeast side.

Improved occupancy allowed apartment operators to boost effective rents at an impressive clip of 4 percent during 2010's first half, with most of that growth occurring specifically during 2nd quarter. Year-to-date increases erased the losses seen in 2009's last half, taking annual rent change just past the breakeven point at a positive figure of 0.2 percent.

Building actually started recently on a couple of moderately-sized apartment communities totaling 311 units. However, the total stock under construction in the metro remains under control at just over 800 units, so it won't take much near-term demand to surpass completion levels.

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 reporting agencies. Improvements to property management systems will allow us to more efficiently track occupancy and rent/price fluctuations at city and county levels.

Originally published on July 23, 2010, by Greg Willett

Apartment demand in Atlanta really took off during the April-June time frame, when just over 8,100 units were absorbed. That quarterly blast took demand during the first half of the year to nearly 11,300 units, far surpassing the concurrent completion count of about 2,900 units. Thus, occupancy is starting to rise. However, the metro's June occupancy rate of 90.3 percent still ranked among the nation's weaker performances. Thanks mainly to a little bit of pricing momentum seen in the urban core neighborhoods, effective rents edged up by 0.4 percent during 2010's 2nd quarter, but annual change remained significantly negative at -3.8 percent. Dwindling new supply volumes will help Atlanta's near-term performance move toward recovery, as ongoing development is down to a total of fewer than 2,100 units.

Performance Highlights are sneak peek views of the latest apartment market performance information from MPF Research. Check out their Apartment Market Reports for detailed findings, including results on the neighborhood level and analysis of factors shaping the shifts in conditions.

Going back to early 2010, Houston's apartment occupancy rate was the worst across the 64 major metros that form the core of MPF Research's national coverage. The metro's general positioning relative to other markets hasn't changed meaningfully over the past few months, but the Bayou City's metrics certainly are beginning to look better.

Roughly 9,900 apartments were absorbed in metro Houston during the April-June period, as quarterly demand topped concurrent completions for the first time in a year and a half. In turn, overall occupancy climbed an impressive 1.4 percentage points for the quarter. And operators even managed to squeeze out a 0.3 percent bump in effective rents over that time span.

Still, that progress only brought occupancy to 88.7 percent, about 5 percentage points under the national average. And the quarterly rent increase still left effective pricing 3.7 percent under the rates seen a year ago.