Apt. rents could see double-digit declines – Minneapolis / St. Paul Business Journal:

After essentially holding steady in late 2008 andearly 2009, effective rentz dropped 1.7 percent during the secondf quarter of this year. Mid-2009 rents also were 1.7 percent beloqw their June 2008 levels. The average apartment rent acrosxsthe Dallas-Fort Worth area in June was $753 per the MPF research shows. Job losses in Northy Texas have hampered demand at the same time as new supply is hittinbthe market, said Greg Willett, MPF Research’e vice president of research.
"Rent reductions have seemed inevitable, and now they’re here,” Willett The declining occupancy and rent rates show the Texas apartment industry is feeling the effects of the national saidWill Balthrope, vice president of investments for the Balthrop e Group of s. "Across the in this country, we are seeinh erosion of top-line income and net-operatinyg income due to the recession and most specificallyt due tojob losses," said Balthrope, who specializesz in the multifamily market. "Even though Texas was the last state tobe affected, our apartment market is tied to the job market.
That being said, we expecty to see continued erosion in rent levels due to increasingf vacancies over the next 12 to18 months." In North Texas, the biggest rent cuts came in urban core, the MPF researcy shows. Effective rents fell more than 8 percenytbetween mid-2008 and mid-2009 in the Downtown/Uptown and Oak Lawn submarkets. The occupanc rate for Dallas-Fort Worth area apartments was 90% as of Occupancy dropped half of a percentage point during thesecond quarter, makinhg the decline a full 3 percent for the year ending in The region had 840 net move-outd during the second quarter, which normally is a seasonallhy strong leasing period.
For the year endint June 30, the region had 6,910 net The move-outs come at a time when 12,6332 units of new supply have been adder for the year endingJune 30. New apartment starts in Nortbh Texas almost completely disappeared duringrecentg months, but properties begun earlier and still in process total 21,331 units, Willett said. Aftef the apartments now unded constructionare delivered, it will probably be three years before more units are started in the Dallas-Fort Worth area, said Brian managing broker of the office in Dallas.
"When you shut the supply off, you'll see occupancies gradually improvwe and concessions startto decrease," he Investor interest in the Dallas-Fort Worth apartmentf market, which has been dormant for the past is beginning to return, O'Boyle He said the D-FW apartment market will bounce back more quicklg than most. MPF Research predicts that apartmentg demand in North Texas will rebound into slightlhy positive territory during thenext year, but "there’as no way that absorption can come anywherr close to the aggressive completion volume that lies Willett said. That means occupancyh will decline further and rent cutswill continue. he said.
MPF Researcu is forecasting rent declines near the 4 percent mark for the year endingbJune 30, 2010. “Neighborhoods with lots of new supplyu still on the way are headedx forreal trouble,” Willett said. “It wouldn’t be surprisin g to see double-digit rent drops in areasz that include the urban core of northern suburbs like Frisco and and the Fossil Creek area ofTarrant
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