Nearly 100,000 apartment units were being absorbed nationally in the third quarter of 2010, a rate not seen since 1999 according to REIS. The renters were back in droves, apparently under the assumption that the economy is in full recovery mode. With little new supply coming on soon fundamentals should continue to improve in the sector. The new rentals pushed the occupancy rate up to 92.9% from 92.0% a year earlier.
Risks to the economy and the apartment market remain, however. Unemployment remains stubbornly high and house prices continue to slump. The price of gasoline is likely to remain high or higher through the summer driving season putting additional pressure on disposable income. In addition, there is no shortage of commercial loans made on apartments at the top of the market and those with five year terms are coming due.
According to the PwC Real Estate Investor Survey, nationally, overall capitalization rates for apartments are currently 6.51% on average and range from 4.25-10%. This is a large decrease from a year ago when overall cap rates stood at 8.03% on average. Average marketing time is also down, averaging 6.29 months versus 8.86 months the year ago quarter. Rents are seen as growing 0.93% on average versus a negative growth rate of (0.90) one year ago.
Does it feel like we're only fifteen percent below the 2007 peak? The Green Street commercial property index (CPPI) shows values are up 35 percent since the bottom in May 2009 and are now fifteen to twenty percent below the last peak in pricing. However, this index is weighted toward high end or trophy properties that are part of forty seven real estate investment trusts. In contrast, the Moody index shows the market fell 42.1 percent from the 2007 peak and has since recovered only 5.5 percent. The Moody index uses repeat sales of commercial properties that have sold for more than two and a half million dollars. If you're a typical apartment owner I'm sure you feel like you're part of the Moody index.
CoStar reports that there are 48% more distressed commercial properties today than in September of 2009. The distressed loans keep piling up and commercial foreclosures are currently 33% higher than 15 months ago (September 2009). So there is a big disconnect between the recovery in the apartment sector as compared to commercial real estate as a whole.
Marcus and Millchap's U.S. Economic and Retail Market Overview and Outlook focused on the decline of credit spreads during 2010, the historically low interest rates, and the increasing sources of funding. Retail fundamentals and values stabilized during the year, and lender confidence improved. The capital markets recover during 2010.
Marcus & Millchap said "Apartments staged a strong recovery in 2010 well ahead of expectations, despite modest job creation and stubbornly high unemployment...All 44 markets in the Marcus & Millchap National Apartment Index will post employment growth, vacancy declines and effective rent gains in 2011, confirming a sweeping recovery and expansion in the U.S. apartment sector above expectations.
Did the assessor lower your value in 2009 or 2010? Was it lowered to 70% of the assessment in 2007? you may have a good reason to appeal your value in 2011. Especially since the property tax base is shrinking in so many places, and as a result, tax rates will probably rise. Be proactive, appeal you 2011 real property assessment.
Risks to the economy and the apartment market remain, however. Unemployment remains stubbornly high and house prices continue to slump. The price of gasoline is likely to remain high or higher through the summer driving season putting additional pressure on disposable income. In addition, there is no shortage of commercial loans made on apartments at the top of the market and those with five year terms are coming due.
According to the PwC Real Estate Investor Survey, nationally, overall capitalization rates for apartments are currently 6.51% on average and range from 4.25-10%. This is a large decrease from a year ago when overall cap rates stood at 8.03% on average. Average marketing time is also down, averaging 6.29 months versus 8.86 months the year ago quarter. Rents are seen as growing 0.93% on average versus a negative growth rate of (0.90) one year ago.
Does it feel like we're only fifteen percent below the 2007 peak? The Green Street commercial property index (CPPI) shows values are up 35 percent since the bottom in May 2009 and are now fifteen to twenty percent below the last peak in pricing. However, this index is weighted toward high end or trophy properties that are part of forty seven real estate investment trusts. In contrast, the Moody index shows the market fell 42.1 percent from the 2007 peak and has since recovered only 5.5 percent. The Moody index uses repeat sales of commercial properties that have sold for more than two and a half million dollars. If you're a typical apartment owner I'm sure you feel like you're part of the Moody index.
CoStar reports that there are 48% more distressed commercial properties today than in September of 2009. The distressed loans keep piling up and commercial foreclosures are currently 33% higher than 15 months ago (September 2009). So there is a big disconnect between the recovery in the apartment sector as compared to commercial real estate as a whole.
Marcus and Millchap's U.S. Economic and Retail Market Overview and Outlook focused on the decline of credit spreads during 2010, the historically low interest rates, and the increasing sources of funding. Retail fundamentals and values stabilized during the year, and lender confidence improved. The capital markets recover during 2010.
Marcus & Millchap said "Apartments staged a strong recovery in 2010 well ahead of expectations, despite modest job creation and stubbornly high unemployment...All 44 markets in the Marcus & Millchap National Apartment Index will post employment growth, vacancy declines and effective rent gains in 2011, confirming a sweeping recovery and expansion in the U.S. apartment sector above expectations.
Did the assessor lower your value in 2009 or 2010? Was it lowered to 70% of the assessment in 2007? you may have a good reason to appeal your value in 2011. Especially since the property tax base is shrinking in so many places, and as a result, tax rates will probably rise. Be proactive, appeal you 2011 real property assessment.
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Get more information on commercial property tax appeals. Get help with Atlanta area property property tax appeals at www.fair-assessments.com
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