Employment Gains Drive Multifamily Growth
Columbia’s MSA continues to recover back to prerecession levels. Unemployment rates are down to 6.5% in April 2013 from a year ago of 7.6% in April 2012. During the same period, employment grew by 1.8%, adding over 4,700 jobs. Companies such as Amazon and Time Warner Cable plan to create several hundred new jobs as they expand operations in Columbia. Moody’s Analytics predicts an employment growth of 1.5% for 2013. Hiring was most notable in hospitality services as Columbia anticipates get a surge of Baby Boomers in the coming years.
Multifamily vacancy rates in Columbia have dropped 60 basis points to 7.3% in the second quarter of 2013 from the fi rst quarter of 2013; down 1 point from the same time last year. Although the Columbia area has seen expansion the past year, occupancy rates remain below the US average of 95.3% and the Southern Region average of 94.4%.
Effective market rents have increased by nearly 2% since 1st quarter 2013 for a total of 3.9% year-to-date resulting in an average monthly rent of $794. Consequently, the buy-to-rent ratio continues to decrease from 134% in 2008 to 78% April 2013. Columbia’s multifamily rents are forecasted to increase by 3% to 3.5% next year.
The second quarter of 2013 has delivered 1,680 new households to the Columbia MSA. There are 827 units under construction, which 315 of the new units are expected to be completed by the end of 2013. The majority of new activity is in the Central and Northeast submarkets with 1,279 units proposed. Supply growth will increase over the next 18 months; however the demand will continue to outpace new supply.
There were 2,414 units traded since the end of 2012 halfway through 2013. Columbia’s multifamily sales have averaged a cap rate of 7.9% over the past six months and will maintain a decreasing trend.
The positive net absorption, increasing rents, downward movement in vacancy rates and strong demand for apartments will carry on through the end of 2014.
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