The US national apartment vacancy rate hit a 23-year high despite being propped up by landlords willing to take lower rent to keep tenants.
The vacancy rate rose to 7.8% in the third quarter, its highest since 1986, according to a report released today.
Vacancies have been rising since the third quarter of 2007, according to real estate research firm Reis.
The US apartment market has been reeling for more than a year as its main demand driver, job growth, disappeared in the US recession.
Loans on apartment buildings have led the real estate industry in defaults with hotels a close second. These types of properties have short leases and downturns show up quickly.
But the tough times for both sectors do not bode well for the rest of the commercial real estate industry, where longer leases can mask falling market rents.
Reis still expects the US apartment vacancy rate to pass the 8% mark within the next year. That would make it the highest vacancy rate since Reis began tracking the market in 1980.
In the third quarter, the US apartment asking rental rate fell 0.5% to $1,035 per month, the fourth consecutive declining quarter. Factoring in months of free rent and other perks landlords have been using to lure or keep tenants, effective rent fell 0.3% to $972, also the fourth consecutive quarter of declining rent.
