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Why apartment vacancies are rising

Jeff Tyler Jan 7, 2010
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Why apartment vacancies are rising

Jeff Tyler Jan 7, 2010
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TEXT OF STORY

Kai Ryssdal: There was an interesting tidbit about the housing market that hit the newswires today. And as we’ve become accustomed, it was sort of counter-intuitive. According to a real-estate research company, apartment vacancies hit 8 percent in the last quarter. That is the highest apartment vacancy rate in 30 years.

And so here’s the disconnect: With so many people losing their homes, you’d figure more people would actually be moving into apartments, right? Not out. We asked Marketplace’s Jeff Tyler to find out what’s going on.


JEFF TYLER: Apartment developers expected to see an increase in the number of renters, so they started building a couple of years ago.

Victor Calanog is with the commercial real-estate research firm, REIS.

VICTOR Calanog: Basically, rentals were supposed to benefit from the housing bust, since people would not be buying homes anymore. Developers could still get financing in 2006. Rents really grew in 2007. So a lot of projects were begun in 2006 and 2007.

He says 120,000 new apartments came on the market last year. But there was less demand. People are sharing apartments with roommates or moving back in with their parents. Calanog says that’s created a renters’ market.

Calanog: If you’re a landlord, and you’re operating an older building, suddenly across the street a new building comes in, 50 percent vacant, with much better amenities willing to offer three months off, what are you going to do to attract or retain tenants? You’re probably going to have to match that kind of competition.

Renters are finding some deals in northern Virginia.

Shaun Pharr is with the Apartment and Office Building Association of Metropolitan Washington D.C. He says landlords are offering incentives.

SHAUN Pharr: Waiving a security deposit. And then, thereafter, granting free rent in whatever increment is deemed necessary to get the lease signed.

He says renters in northern Virginia are negotiating one, two, and even three months of free rent.

I’m Jeff Tyler for Marketplace.

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