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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.

Avoiding Move-Outs in the Raleigh Apartment Base
October 22, 2009
by Greg Willett

After the Raleigh apartment market managed to sidestep the net move-outs seen in most U.S. metros during calendar 2008, deepening job loss during early 2009 made it look questionable whether absorption would hold in positive territory this year. It now seems like Raleigh's string of positive demand will continue for a 15th straight year, as decent absorption during 3rd quarter erased the modest loss of residents incurred during 2009's first half.

About 1,060 apartments were absorbed in the Raleigh/Durham area during the July-September time frame, taking demand for the first nine months of 2009 up to 640 units. Leasing activity this year has been very focused within the recent completions still building their initial resident bases. Demand for top-tier product registered at about 600 units during 3rd quarter and at roughly 1,300 units for 2009 through September.

Most of this absorption has occurred in the 1,777 units in properties completing so far during 2009 or in the burst of about 1,200 units finished just as 2008 drew to a close. Quite a few recent completions still have a ways to go before reaching stabilization, however, as September's survey showed that about a third of the units in projects finished over the past four quarters are still vacant.

Raleigh's overall occupancy rate stood at 91.2 percent as of fall 2009. Occupancy has been holding right around that 91 percent mark throughout calendar 2009.

As in most other markets across the country, Raleigh's deterioration in overall performance of late has been focused more on rent achievement than on occupancy. Effective rents that take into account the use of concessions fell by 0.6 percent during 3rd quarter and by 4.7 percent during the year-ending September.

While rents were cut during the past year across every neighborhood and in every product niche, it's the middle sector of the market in Raleigh that seems to be feeling the most pain. The metro's sizable stock of properties from the 1980s suffered price reductions of 6.4 percent during the year-ending September.

Raleigh appears on a path to struggle through a difficult period right at the end of 2009, as about 1,700 of the 2,968 units in projects under construction are in developments that should finish during 4th quarter's typically slow leasing season. Thereafter, however, occupancy could begin rising comparatively quickly, stemming the rent cuts that have been significant during recent months. MPF Research is anticipating basically flat apartment revenues in Raleigh for calendar 2010, whereas moderate further deterioration is forecast for the U.S. as a whole.

Market Dynamics is an examination of key influences on the apartment industry by MPF Research, the industry’s most trusted source of apartment market intelligence. To receive the latest Market Dynamics newsletter in your e-mail inbox, please click here to subscribe.

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