Apartment Rents Decline as Vacancies Hit Record

April 6 (Bloomberg) -- U.S. apartment rents dropped in the first quarter and the vacancy rate remained at a record as unemployment near a 26-year high limited tenant demand.

Actual rents paid by tenants, known as effective rents, declined 1.5 percent from a year earlier, Reis Inc. said in a report today. Asking rents fell 1.6 percent, according to the New York-based property research firm. Vacancies were unchanged at 8 percent, the highest level since 1980, when Reis began tracking the number, said Victor Calanog, director of research.

U.S. rental demand has slumped as employers cut 8.4 million jobs since the start of the recession in December 2007. The bigger drop in asking rents than effective rents in the first quarter signals that landlords are pricing their properties lower at the outset and minimizing concessions, Calanog said.

“Landlords are saying: ‘Even before we talk about the free month off, and even before we talk about the free gym, we want to lower the asking rents to get you through the door,’” he said in a telephone interview.

The U.S. unemployment rate was 9.7 percent for the third straight month in March, the Labor Department said April 2. The economy added 162,000 jobs in the month, a sign the labor market may be recovering.

Actual rents fell year over year to an average of $967 in the first quarter, Reis said. Asking rents dropped to $1,027.
Rent rates rose less than half a percent from the previous quarter, the first sequential growth since the three-month period when Lehman Brothers Holdings Inc. filed for bankruptcy.
The net change in occupied space, a measure of leasing known as absorption, grew by 20,424 units, the most for the first quarter since 2000, according to Calanog.

“The perception that labor markets are stabilizing is probably enough to tip the demand for apartments,” he said.
Effective rents fell the most, year over year, in Las Vegas; San Jose, California; Phoenix; Seattle; and San Francisco, according to Reis.

Rents paid by tenants climbed the most in Colorado Springs, Colorado; Washington, D.C.; San Antonio; and Dayton, Ohio.

This article appeared at http://www.bloomberg.com/.