Rents fail to fall as S.L. County vacancy rates rise

Rents fail to fall as S.L. County vacancy rates rise

By Jasen Lee, Deseret News
Published: Thursday, April 30, 2009 9:38 p.m. MDT

Apartment vacancy rates in Salt Lake County more than doubled from the first quarter of 2009 compared to the same period last year, according to a report released Thursday.

The CB Richard Ellis Apartment Report tracked rental rates for 140 apartment complexes with more than 100 units in Salt Lake County. Combined, they have 29,556 units.

The data showed that vacancies in the state's most populous county rose to 6.56 percent in the first quarter, up from 2.49 percent one year earlier.

"Landlords are increasingly losing renters because of increasing job losses," Seth Rossow, multi-family specialist at CB Richard Ellis in Salt Lake said in a news release announcing the figures. "In addition, many would-be renters in these challenging economic times are bypassing renting an apartment unit and instead moving in with friends or family."

He told the Deseret News that many renters are living in basements, doubling-up or opting to rent homes that are unable to sell in the current slow economic market.

"When these homes that are sitting on the market can't be sold, a lot of the owners are choosing to rent out these homes, so it's creating a 'shadow market' of rental units," he said.

Rossow added the rising apartment vacancy rate has led to a flurry of concessions aimed to entice renters to sign leases. Thursday's report stated that 64 percent of all units are offering concessions.

"Last year, there were virtually no concessions in the market," he said. "Today, landlords are offering everything from reduced rent to flat-screen TVs."

One property owner is holding a drawing to give away a new $30,000 car, he said.

"Instead of prices responding by decreasing, communities are offering concessions like these free giveaways," he said in an interview. "They are offering a free month's rent — or in some cases two months free."

The overall average rental rate for apartment communities with more than 100 units in Salt Lake County was $812 in the first quarter, virtually unchanged from a year ago, the report stated. The most expensive rents were found in northeast Salt Lake County at an average rate of $953, while the least expensive rents were found on the county's northwest side with an average of $686.

Rossow said that despite the rising apartment vacancies, many more new units will be coming online in the near future. For the near-term, vacancies will likely remain a bit higher as the market works to absorb the additional capacity in both the traditional and "shadow" rental markets, he said.

The rental market is in an awkward state, Rossow stated in the report.

"Job losses and home purchases are creating signi?cant softening in rental demand compared to 2007 and 2008," he said. "Renters are showing some resistance to signing a 12-month lease due to uncertainty with their current employment."

He said vacancy rates will likely trend upward with Utah's unemployment rate over the next year, with market rents remaining stable or decreasing slightly to allow for concessions to leave the market.

He noted, however, that the a 5 percent vacancy rate is typically considered full capacity, meaning the current 6.56 percent vacancy rate isn't considered all that alarming.

"It's still pretty healthy from a market standpoint," he said.

E-MAIL: jlee@desnews.com
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