26 Mar CoStar – State of the Market Video: Coronavirus Will Likely Play Havoc With Apartments
Vacancies Could Reach Record Levels, Topping a Recent Peak in 2017
State of the Market Video: Coronavirus Will Likely Play Havoc With Apartments
Vacancies Could Reach Record Levels, Topping a Recent Peak in 2017
By John Doherty
CoStar NewsMarch 25, 2020 | 02:34 P.M.
Expect U.S. apartment vacancy rates to hit record highs, CoStar’s experts say.
The wave of new properties scheduled to be finished up in the next few months, combined with the huge disruption from the coronavirus pandemic, will likely play havoc with rent growth and lease-up.
“We estimate that vacancies nationwide have risen to around 6.5% — just a little lower than the recent peak back in 2017,” according to John Affleck, CoStar’s vice president of market analytics. “But, in our new base case released this week, vacancies are poised to go much higher.”
Many markets will see vacancy exceed 9%, he said in a new video — the highest level on record.
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“In this severe downside scenario, asking rents fall by nearly 6% this year, and continue to fall into next year. Total rent losses reach 10%,” he said.
Markets facing heavy supply are projected to fare the worst: the Bay Area, South Florida and Las Vegas.
The short term seems a bit bleak, according to Affleck. But he said the same fundamentals that rocketed apartments to the top of many big investors’ shopping lists — strong rental demand from young professionals and suppressed home ownership rates — will emerge again.
“The longer-term outlook offers some hope,” Affleck said. “Beyond the pent-up demand, crises often produce above-average numbers of divorces, marriages and births — all of which create demand for housing. But as the pandemic changes urban life as we know it, the COVID generation may seek solace in the suburbs, along with the security of a mortgage, the joys of a yard and the cocoon of a car.”