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ST. LOUIS-The multifamily market is poised to weaken in the beginning half of 2009 due to significant local job loss and oversupply, according to the 2009 National Apartment Report issued by Marcus & Millichap.

During 2008 nearly 26,000 jobs were eliminated in the St. Louis area, with another 18,400 jobs expected to be lost this year. Companies like Boeing, which announced nationwide layoffs, and Anheuser-Busch InBev, which announced plans to layoff more than 2,000 employees last December, added to unemployment figures. Missouri unemployment reached 7.3% in December, a 25-year high for the state. The city’s unemployment is estimated to be on par with the state average.

The downtown area will be hit the hardest. For years now investors have been working on redeveloping the city and as a result a bulk of the projects will come online in 2009. Marcus & Millichap estimate the metro area’s vacancy will rise 120 basis points to 8.7% by year end. Additionally, about 400 units are slated to enter the market during 2009, increasing supply by 0.3%.

With job losses and high vacancy rates, rent gains are expected to hit their slowest pace in five years, increasing only 1.1% during 2009. This will put the average asking rent at $740 per month.

As the year wears on, “Transaction velocity in St. Louis should pick up late in 2009, assuming the expectations gap narrows,” says Stephen Maulden, regional manager of Marcus & Millichap’s St. Louis office.

The report predicts that regional investors will re-enter the area when the credit markets stabilize, hopefully in the second half 2009. Still, these investors will gravitate toward the southern submarkets, and areas like Clayton and Mid-County where the local economy is recovering quicker and where there is easy access to major roadways.

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