The quarterly report says the current average rent of $845 per month represents a 6.3% increase over the rent at this time last year. Along with the rent growth, the market enjoys a vacancy that hovers near a record low. But that vacancy rate, 4.2%, is nonetheless a slight increase compared with the vacancy rate at the beginning of the year. The slight uptick in vacancy occurred because many Inland Empire renters have made the jump to homeownership over the last six months, the Marcus & Millichap report explains, but it points out that the increase resulted from renters leaving class A apartments, which posted a vacancy rate of 5.3% for the quarter. "Concessions are still in place at most luxury apartment complexes," the report says, but demand for lower-end units remains strong, with a vacancy level of 3.4% for class B and class C apartments.

The continued influx of new residents and relative lack of construction of new units are keeping demand for apartments at elevated levels, says Kevin A. Assef, senior vice president and regional manager of the Marcus & Millichap Ontario office. He says investor interest in local apartments remains strong, with most properties coming to the market receiving multiple offers. Aggressive investors have pushed the median selling price to $59,000 per unit, an increase of 14% from 2002.

The quarterly study says development of new apartments has increased, but the level of building "remains subdued when compared to the construction spree of the 1980s" when thousands of new units were being built each year. Only 2,400 new units are expected to be completed in 2003.

The Marcus & Millichap study cites national and international economic weakness as factors that have reduced job growth in the Inland Empire, and job growth is considered by experts to be one of the keys to a strong apartment market. But the report says the two-county (Riverside and San Bernardino) region's economy continues to expand and remains a top performer in the nation. Even with the slowing, employment growth amounted to 24,100 jobs in 2002 and is forecast to reach 17,000 jobs in 2003.