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Although multifamily has been less damaged by the recession than other commercial property types, it has nevertheless seen its occupancy erode even as landlords offer generous concessions. A recent GlobeSt.com Quick Poll posed this question: “Apartment Occupancy is High. Rent Hikes to Follow?” Nearly half–47%–said no. More than a quarter, 28%, answered yes, while 25% responded that it was too soon to tell. Mark Scott, managing director and senior vice president at NorthMarq Capital in Parsippany, NJ, tells GlobeSt.com that while the long-term outlook for the multifamily sector is strong, rental increases are not on the immediate horizon.

“I just came back from the ULI conference in San Francisco, and some of the discussion there was that they expect rents to spike in 2011. The reason for that is the lack of multifamily construction that is going on today.

Multifamily demand will continue to grow as our population continues to increase. The US crossed over 300 million residents a few years ago, and we are going to cross over 400 million in a few more years. That bodes well for rents in the long term. But in the short term, we need to rebuild our occupancy base. There has been softening throughout the nation as people have either moved back in with Mom and Dad or partnered up with roommates. That has pushed vacancy rates higher across the nation, albeit multifamily has a lower vacancy rate than industrial, office and retail. Certainly, multifamily is the sector that looks best today. But we have to rebuild the occupancy base. It’s a very competitive market out there for tenants.

I spoke with a couple of developers this morning about this question, and they say the market is not strong enough to start raising rents. The issue is not really raising the top-line rent; the issue is that we have concessions in the market. There are up to two months free rent in certain markets. The concessions are unbelievable.

Effective rent may start to grow once jobs losses stop. When will job losses stop? Maybe not until Q2 of 2010. When that occurs, then we may start seeing an easing of the concessions–two months free rent goes down to six weeks–and effective rents start to grow.

There is another aspect to this and that is turnover must slow down. There has been a lot of turnover in multifamily. Why? A lot of people are making shorter-term decisions than they used to. They are thinking, “How am I going to feed my family? How am I going to make my rent check? How am I going to do everything on a month-to-month basis?” They are not looking long term as much as they used to. So there is a bit more turnover than usual in the marketplace.

I don’t think rents will rise, not until mid-2010, at the earliest. At that point in time, you will start seeing effective rents begin to grow. Not top-line rents, not the headlines you see advertised, but the effective rents. The concessions will start to decrease and the effective rent will grow.

Occupancy is high relative to office, industrial and retail, but it’s not high relative to the sector’s historical standards.”

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