Apartment vacancies drop

Fewer apartment communities under construction and job growth have resulted in increased rental rates and fewer renter concessions, according to a report released Thursday by Salt Lake- based Commerce CRG.

The apartment vacancy rate in Salt Lake County declined to 6.1 percent at mid-year 2005, down from last year's rate of 7.2 percent.

The report was based on a July survey by James Wood, director of the University of Utah's Bureau of Economic and Business Research, that included a random sample of 84 midsize to large apartment communities making up 14,060 units in Salt Lake County.

Roughly two-thirds of the apartment communities surveyed in the report offered concessions in 2005, about the same number as in 2004. However, the amount of the concessions in 2005 was smaller than those offered a year ago.

Because the survey adjusts for concessions, the average monthly rental rate rose to $624, up 4.7 percent from $596 a year ago.

Kip Paul, investment broker with Commerce CRG, said he sees the falling vacancy rate as a "turning point" that apartment owners have been anticipating.

"Once you get below 5 percent vacancy, that's considered very healthy," Paul said. "Couple that with positive rent growth, which we really haven't had for about three years, and the combination of those is pretty dramatic."

Paul said demand by investors in apartment properties significantly exceeds available supply.

That is partly due to less apartment construction activity.

In 2004, 607 units were built, the lowest number since 1992.

Wood said 535 apartment units have been built in Salt Lake County from January through May of this year.

"We have approximately 100,000 rental units in Salt Lake, and for the last three to five years we've built around 1,000 units each year," Paul said. "That's only an increase of 1 percent in the supply, so there's no overbuilding going on."

L. Paul Smith, executive director of the Utah Apartment Association, which represents more than 60,000 rental units, said most apartment owners agree that the market is getting better.

"It's been a very difficult few years," Smith said. "We know markets work in cycles, and we're hopeful that we're on the upswing for quite a while."