WEST PALM BEACH, FL-Projected job growth and pent-up demand forrental housing are sparking a modest recovery in the Palm BeachCounty apartment market. So says Marcus & Millichap’s FourthQuarter 2010 ApartmentResearch Market Update.

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The firm reports a significant resurgence in demand for class Arentals through the first three quarters. Demand for class B andclass C rentals was virtually flat in the period, however renewedhiring in trade sectors is a good start toward getting thelower-tier renter pool active again.

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Investment activity still trails the strengthening in vacancyand rents, but low prices will stimulate greater activity in themonths ahead. Marcus & Millichap also predicts possible changesin the tax treatment of capital gains could generate more deals byyear end, and low interest rates and greater availability ofacquisition financing also will encourage investors to act.Transaction velocity rose 40 percent in the past 12 months, basedon a small number of transactions.

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“We’ve seen a pick up in velocity as far as deal flow andsales,” Tal Frydman, vice president of Investments at Marcus &Millichap, tells GlobeSt.com. “There’s a mixture of deals gettingdone, but we’re seeing a lot of buyers picking up notes, makinginvestments to rehab the properties, then selling them to endusers.”

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Marcus & Millichap predicts that the recent rally in vacancyand rents will bode well for future deals by providing propertyowners with a few quarters of stabilizing or improving NOIs, makingprices easier to set. Moreover, additional investors may enter themarket due to the recently enacted Distressed Condominium ReliefAct, which shields bulk buyers from liability related toconstruction defects.

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Developers only completed two multifamily properties in PalmBeach County in the 12 months ending in the third quarter. Thoseproperties brought 711 units online. Only 223 units were permittedin the past 12 months, a 55% decline. Meanwhile, vacancy rates forclass A units in the third quarter sat at 8.1% and rents rose .3%in the third quarter and are up 1.6% year to date.

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“Multifamily sales will definitely be stronger going into 2011,”Frydman says. “The gap is closing between buyers and sellers interms of the value expectations of properties. Sellers arerealizing that the values of properties today will remain fairlysimilar for the next couple of years. The worst is behind us.”

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