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Market Dynamics provides an examination of key influences on apartment industry performance. You’ll value the perspectives and insights from the MPF Research team, including Greg Willett, an industry expert widely known for his knowledge and expertise in the field. View Market Dynamics online or Sign Up for e-mail delivery as new issues are posted.

Detecting a Pulse in the Inland Empire Apartment Market
October 19, 2009
by Greg Willett

In case you missed the turning point, the Inland Empire's apartment occupancy rate actually appears to have already bottomed out. Absorption that came in at more than 4,100 apartments during the April-September time frame pushed up occupancy across Riverside and San Bernardino Counties by a notable 2.3 percentage points, bringing the fall 2009 figure to 92.6 percent.

Just as encouraging as the occupancy bump was 3rd quarter's rent performance. While lots of metros that posted positive apartment absorption during recent months bought that demand with substantial rent cuts, pricing in the Inland Empire as a whole actually held steady between June and September. Effective rents went up a little in the Foothill Area (home of the key Rancho Cucamonga apartment base) and the Coachella Valley, countering the further reductions that occurred in East San Bernardino County and Southwest Riverside County. Riverside/Corona, the metro's other key cluster of apartments, registered flat rents for the quarter.

Influencing the momentum that has started to emerge in the Inland Empire's apartment market performance, rapid home sales are reducing the previously over-the-top volume of single-family residences offered for lease. According to information from MDA DataQuick, more than 65,100 resale and new homes were purchased during 2009's initial nine months in the Inland Empire. That tally jumped 37 percent on an annual basis.

With so many home sales occurring at a time when Riverside and San Bernardino Counties are losing jobs at an annual rate of more than 70,000 positions, investors likely have snapped up many of the units. That means these houses aren't necessarily out of the shadow market rental pool permanently. The return of alternative rentals that currently are not in the leasing stock certainly could prolong general recovery in the Inland Empire's apartment sector, particularly by placing limits on the potential for rent growth.

But for now, at least, Riverside and San Bernardino Counties are exhibiting some of the most favorable signs among the beaten-down West Coast apartment markets.

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