With the economy still struggling through the prolonged economic
recession, with consumers concerned about employment and the prospects
for recovery, the multi-family sector is displaying softening, but
positive fundamentals. Demand for apartments declined in the fourth
quarter of 2008, closing the year at a much lower pace of net
absorption than 2007. However, demand is stronger in the first quarter
of 2009, at 60 million square feet. Absorption is projected to maintain
a moderate, but positive pace for the rest of the year.

Reflecting deteriorating economic conditions, new completions have
been slowing down over 2008, closing the year about four percent lower
than 2007. Completions are expected to continue dropping another 31
percent during 2009.

The national vacancy rate is at 6.0 percent for the first quarter of
2009, down 10 basis points from the previous quarter. However,
following the rise in vacancy rates over the past year, rent growth in
the multi-family sector is down. For the first quarter of 2009, rents
are 0.4 percent.

Regionally, markets with low vacancies are
concentrated along the coasts. In fact, of the 15 markets with the
lowest availability rates for the quarter, only three are in the
Midwest. Incidentally, topping the list of lowest availability is
Pittsburgh, PA, with a vacancy rate of 4.4 percent. It is followed by
San Diego, with 4.7 percent vacancy, as well as San Jose, CA and
Newark, NJ, both of which post vacancies of 4.8 percent. Washington,
DC, Minneapolis, MN and Boston, MA, each have vacancy rates of 5.2

On the other side, there are a few markets that have experienced a
great deal of residential construction over the past few years, which
competed for consumers with the multi-family sector. The list includes
Phoenix, AZ, with a vacancy rate of 10.9 percent, Jacksonville, FL
(10.8%), Atlanta, GA (10.7%), Las Vegas, NV (9.8%), and Orlando, FL

Considering multi-family's performance during 2008 and weighing the
next few months, the sector is projected to remain stable. By the end
of 2009, the vacancy rate is expected to be 6.2 percent, while rent
growth for the year is expected to be 1.7 percent.


Lowest Multi-Family Vacancy Rates

2009.Q1 Forecast

Pittsburgh, PA


San Diego, CA


Northern New Jersey (Newark)


San Jose, CA


Boston, MA


Minneapolis, MN


Washington, DC


Baltimore, MD


Oakland, CA


San Francisco, CA



National Average*


Source: NAR/TWR


*Not all markets are represented.