Austin Business Journal - 2:40 PM CST Thursday, Jan. 26, 2006

Austin apartment market jumps in national ranking
The Austin multifamily market leaped five spots to No. 22 in a national study ranking 42 cities.
Results are part of Marcus & Millichap Real Estate Investment Brokerage Co.’s annual National Apartment Index and research report.

“Investment activity will remain brisk in 2006 as buyers are encouraged by forecasts for declining vacancy and increasing rents,” says Bradley Bailey, regional manager of Marcus & Millichap’s Austin office. “Strong effective rent and occupancy growth will support the forecast for double-digit growth in gross property revenue over the next two years.”

The reports findings include:

Asking rental rents are expected to rise 2.5 percent in 2006 to $785 per month. Property owners will continue to limit rental incentives, with the average effective rent expected to increase 6 percent this year to $721 per month.
Vacancy is projected to fall 100 basis points this year to 7.4 percent, after a 180 basis point reduction in 2005. Despite the large supply of affordably priced homes, strong employment growth, robust in-migration and limited construction will allow demand to outpace new supply during 2006.
The local economy is once again expected to post strong employment growth. Area employers are forecast to add 30,000 positions in 2006, a 4.4 percent increase. More than 10,000 new jobs are expected in the government, and professional and business services sectors.
Developers are expected to deliver approximately 1,660 units this year, just above the amount that came online in 2004 and 2005. The majority of construction will be in the Central and Far South Austin submarkets.
Orange County in California claimed the top spot in the 2006 index, surpassing last year’s leader, the Riverside-San Bernardino area, also in California. The region’s median home price of more than $700,000 makes Orange County one of the least affordable housing markets in the country, which will keep renter demand at high levels.

Fort Lauderdale occupies the No. 2 position due to robust job growth and low vacancy. Las Vegas moved up one spot to No. 3, supported by strong condo conversion activity and declining vacancy. San Diego fell two places to No. 4, and New York City-Manhattan climbed four positions to complete the top five.