Apartment Managers See Marked Improvements in Fundamentals This Year

The economic downturn certainly had a negative impact on the apartment sector, but notable improvements in the market from 2009 to 2010 indicate that the worst may very well be over.

By Barbra Murray, Contributing Writer

The economic downturn certainly had a negative impact on the apartment sector, but according to results from a survey by credit and information management company TransUnion, notable improvements in the market from 2009 to 2010 indicate that the worst may very well be over.

TransUnion’s survey involved 476 property managers, approximately 95 percent of whom oversee apartment communities with 50 units or less. According to their responses, it seems a year makes quite a bit of difference.

Vacancies are perhaps the most obvious indicator of the state of the commercial real estate market, and the apartment sector is no exception. Seventy percent of participants in TransUnion’s study noted that their properties are fully occupied, compared to 60 percent in a summer 2009 survey. Current leasing rates are also serving as a good sign of a rebound. The economic downturn and jump in unemployment pushed down demand and thereby decreased rates, but those numbers are plummeting no more. Respondents who noted that prices have either risen or held steady since 2009 accounted for 76 percent of the group.

The survey found year-over-year changes in other areas, including the applicant credit issue. A significant amount of concern remains. According to TransUnion’s Credit Risk Index, while the index has continued to fall, declining over 2 percent from its peak of 129.67 at the end of last year, it is still at a relatively high 126.79. The less-than-desirable index number is reflected in survey participants responses; 67 percent professed concerns regarding the ability to sign-on reliable tenants–as determined by credit standing–for the remainder of 2010. This unease among property managers is high, but not as high as it was last year when 76 percent of study participants noted such apprehensions.

Among the other distinctions between this year and last is the foreclosure victim population. It’s just a slight change, but 39 percent of the property managers said they had experienced an increase in applicants who were seeking to rent after having lost their home to foreclosure, compared to approximately 40 percent in 2009.

While property managers have seen welcome improvements, the apartment market has not yet returned to full health. “Despite the positive signs we observed in the survey, unemployment rates remain high and many prospective tenants continue to struggle in this difficult economy,” Mike Mauseth, vice president of TransUnion’s rental screening business unit, said in a prepared statement.