MARKET SNAPSHOT: 2009’s Bright Spots According to M/PF Yieldstar

By Erika Schnitzer, Associate EditorSan Diego, Washington, D.C.—While the apartment market is experiencing a rough time nationwide, San Diego and Washington, D.C. appear likely to remain in relatively good shape in 2009, according to M/PF Yieldstar.Though the outlook for these two cities shows flat revenues for the coming year, this shows some strength in today’s crippled market, where most of the country is experiencing a 5 percent revenue cut, Greg Willett, vice president of research & analysis for M/PF Yieldstar, tells MHN. While both metros are losing jobs, it is not as extreme as the rest of the nation. The job market in Washington, D.C., for example, has some strong prospects in the expanding government sector. And though occupancy rates have fallen, they still remain in the 90 percent range for both metros.The occupancy rate in Washington, D.C. is currently at 93.8 percent, down from 96.2 a year ago. However, the metro is experiencing some rent growth—in the past year, it has increased 1.8 percent, which, as Willett notes, is very positive compared to elsewhere.The D.C. metro area has a significant number of units under construction—about 10,000, with 6,000 slated for completion in 2009. “That’s too much and we’ll see occupancy come down, but rent growth should stay positive, giving flat revenues,” Willett predicts. Given the change in administration and the number of resulting new jobs, he believes that the area has some prospect for demand versus net move outs.Meanwhile, San Diego’s current occupancy, while down 2.6 percent, remains fairly strong at 94.9 percent. A year ago, occupancy was at 97.5 percent. However, rent change remains positive, increasing 1.1 percent year-over-year, and Willett predicts that revenues will remain about the same.While the metro currently has 3,000 units under construction, only half of these are slated for completion this year. “If you’re only adding that much product in a fairly sizable metro, the hole you’re digging is not that deep,” Willett asserts. “We’re anticipating a handful of move outs so occupancy will come down a little bit, but rents will probably stay slightly positive, so you end up flat on revenues.”Though both metros have a shadow market to some extent, Willett points out that there won’t be a huge impact on San Diego. He notes that while there has been a huge number of foreclosures, the homes do not compete with apartments because of their higher pricing. And in Washington, D.C., he says, there is enough neighborhood variety so that apartments are not being greatly affected.Willett also notes that as the nation looks toward an economic recovery, which he believes will take effect in 2011 or 2012, Washington, D.C. and San Diego will remain in the top 10 markets. He also predicts that the Bay Area, Raleigh, N.C., and certain Florida markets will make a comeback.