Multifamily Demand Slowed By Job Losses

BOISE, ID-Decreased demand for apartments is forcing vacancy rates up, although the average rent growth remains steady, according to a report by Hendricks & Partners. The local economic slowdown, as well as low mortgage rates that are increasing home ownership, is taking its toll on the Boise apartment market, shows the report.

At the end of the third quarter, employment growth was 2.5%, down from 4.7% from a year earlier.

Even with the lower employment growth, the area shows a net gain of 5,600 jobs. At the same time, layoff continues at major employers such as Albertson’s and Hewlett-Packard, while Micron Electronics has a hiring freeze, which is hindering employment growth, according to the report.

Sales of affordable homes are up 22%, which is taking its toll on the apartment market.

“Demand (for apartments) is receding at a rapid pace,” shows the report. There was a negative absorption of 782 units in the third quarter, compared with a positive absorption of 372 units during the same period of 2000.

“Vacancy rates are rising in response to the drop in demand,” Hendricks & Partners notes. “The overall average vacancy rate jumped to 7.4% in the third quarter of 2001 form 2.1% in the third quarter of 2001.”

Vacancy rates are rising across all submarkets, especially in North Boise, where the average vacancy rate increased to 9.2% from 1.3% and in the South/Southeast submarket, where the average vacancy rate rose to 10.5% from 3.3%. Still, the average monthly market rent is at $654, up from $634 a year ago, according to Hendricks & Partners.