Reno’s Apartment Market Posts Surprisingly Solid Fundamentals [Video]
The Reno economy is still in rough shape, but the apartment market has put up some surprisingly decent numbers – especially when compared to Las Vegas.
Reno Apartment Market Update for Q4 2012
Generally speaking, we tend to see economic conditions aligning fairly closely with apartment market fundamentals, but of course there are always exceptions. And surprisingly, Reno is one of them.
Let’s start with occupancy, which was in bad shape at the end of 2009 at about 90%. But then we saw some strong upward momentum as occupancy has jumped 450 basis points over the past three years. And as of Q4 2012, the occupancy rate for the metro is at 94.8%, which is right in line with the U.S. average.
Looking at rents, the story is not too bad for Reno. In fact, we saw a little bit of a pop at the end of 2012. Annual rent growth measured 3.4% as of Q4, which is 40 basis points better than the U.S. average. But there has been a good bit of fluxuation in the metro, as you might expect, and the market did see some sharp cuts during the recession.
So why is Reno standing above Las Vegas? One reason is because Reno’s employment base grew a respectable 1.5% in 2012 against only 0.8% in Vegas. But both markets lost a huge number of jobs to the recession and both have a long way to go to reach recovery.
Another reason that’s perhaps even more important is that Las Vegas added a ton of new housing inventory over the past decade. So when the economy went south, Las Vegas found itself with a huge overstock. But that’s not been as much of an issue in Reno. There just hasn’t been much residential construction over the past decade and so we don’t have a lot of vacancies to work back through.
So what does that mean for 2013 and beyond for Reno? MPF Research doesn’t expect to see Reno sustaining occupancy around 95% and rent growth at 3% annually, but the general trend should still remain upward but probably not at that degree.
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