Real Estate Forum - November/December 2009

below that mark since the fourth quarter of 2005.

Still, developers have seemingly been infused with a bit of optimism. For both market-rate and below-market-rate apartment product, the indices for both current and planned starts for the next six months rose by several points.

Another hopeful sign for the market comes from NAHB’s measure of expected demand for rental apartments. While current demand was little changed on a year-to-year basis, the index measuring demand anticipated in the next six months rose significantly for all types of apartments. The future demand index for below-market-rate units rose from 28. 2 in Q3 ’08 to 43. 9 in Q3 ’09, while the measure for market-rate units increased from 19. 1 to 32. 7 during the same period of time.

How any inventory increase will play out in the market is unclear, especially since both asking and effective rents continue to grow weaker. In the third quarter of 2009, the index measuring

are special-purpose projects in either the senior, student or affordable housing arenas.” Those particular segments of the market either receive special subsi-dies or have access to funding sources

that are not available to traditional multifamily properties.

Patterson notes that national multifamily production typically runs at approximately 300,000

units per year; it is now running at below 100,000 units. He does not expect that number to hit the 300,000-mark until 2012 or 2013. However, he says that the lack of new product going forward is good for the industry since there is little capital available for new construction and, at present, there is really no demand for new product.

In fact, when asked about his thoughts on the apartment market in 2010, the CEO states, “I believe flat is good news.”

ZOM—which has developed more than 11,000 units mainly in major mar-

“Improvements in sales volume and financing suggest the transactions market may finally be thawing.”

MARK OBRINSKY National Multi Housing Council

asking rents dropped to 41. 7 from 50. 8 the prior year, while the index that measures effective rents declined from 38. 5 to 26. 6 in the 12-month period.

Most market participants say that if

there is any new supply added to the inventory, it will likely be a small amount of very focused product. Steven Patterson, CEO of ZOM Holding Inc. of Orlando, FL, reports, “New multifamily starts are absolutely in the tank. Basically, the only things getting started these days