Marcus & Millichap, an investment-sales firm based out in Cal-ee-forn-ya, unloaded on Friday evening its 2009 forecast for apartment markets throughout the U.S. The predictions for New York City are unsurpisingly grim for landlords, given the waves of layoffs and the city’s general economic malaise: The firm expects vacancy rates to climb toward 5 percent, and effective rents in market-rate apartment to rise a modest 1.5 percent to $2,096 on average monthly.
Still! The report does note that the vacancy rates in market-rate rentals in more desirable neighborhoods will remain rather steady, with landlords spared a lot of suddenly emptied units. Why? Because one does not leave the Village if one can help it. One takes a roommate before one lets that happen!
[V]acancy is forecast to remain in check in popular Manhattan and Brooklyn neighborhoods such as the Upper East Side and Upper West Side, the Village, downtown Brooklyn and Park Slope as distressed renters take on roommates rather than move out of desirable locations.
But in less desirable locations? More vacancies for landlords and competition from "shadow rentals"–condos or other for-sale housing that’s being rented out.
In contrast, supply concerns will mount in Long Island City, Midtown West, the Financial District and southeastern Harlem, where deliveries will be elevated and the threat of shadow rentals persists.
A release ont the Marcus & Millichap report below:
Jan. 22, 2009 – Following years of robust growth, the upheaval on Wall Street will soften fundamentals in the New York City apartment market. The fallout from the collapse of the investment banking industry, along with the late-2008 announcement that Citigroup will be cutting 10 percent of its worldwide work force, will result in the direct elimination of thousands of positions, according to the 2009 National Apartment Report by Marcus & Millichap, the nation’s largest real estate investment services firm.
“While local transaction velocity will remain modest in 2009, the buyer pool should change significantly,” says Edward Jordan, regional manager of the Manhattan office of Marcus & Millichap. “Experienced New York property owners who have waited on the sidelines for the froth in the investment market to dissipate are poised to re-enter the market.”
· Citywide, employment is expected to contract by 94,000 positions, or 2.6 percent, in 2009.
· Builders are projected to add roughly 2,500 market-rate units to inventory this year. In 2008, 1,997 units were brought online.
· As employers trim payrolls in 2009, vacancy is expected to climb 130 basis points to a still-tight 4.7 percent.
· In large, market-rate complexes, asking rents are forecast to advance 2.1 percent this year to $3,006 per month, while effective rents gain 1.5 percent to $2,906 per month.
· Acquisition activity will be conservative and based on location and steady returns. Additionally, the fairly predictable revenues of rent-stabilized housing will provide investors with a means to hedge the risks to cash flows.
Also included in the report is the firm’s annual National Apartment Index (NAI), a snapshot analysis that ranks 43 apartment markets based on a series of 12-month forward-looking supply and demand indicators. New York City moves down six places this year to No. 9. San Francisco retained the top position in this year’s NAI, supported by the strongest effective rent growth in the ranking. San Diego climbed six places to No. 2, due to the lowest vacancy rate of the markets covered. Washington, D.C. moved up six places to No. 3. Los Angeles checked in at No. 4, and Seattle moved up three places to claim No. 5. Two Midwestern markets, Minneapolis-St. Paul and Milwaukee, posted the most significant upward moves in the index.
For a copy of Marcus & Millichap’s National Apartment Report and the complete NAI rankings, visit www.MarcusMillichap.com.