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SALT LAKE CITY — Finding an apartment in the Salt Lake metro area is becoming increasingly more challenging these days, and it probably won't get much easier in the near future.
Recently released data indicated that the overall mid- year apartment vacancy rate in Salt Lake County was 5.2 percent, a slight decline from last year when the rate was at 5.7 percent. The decrease in vacancy rates was a result of rising demand for rental units due to the increasing number of households unable to qualify for homeownership.
"With the chaos in the home mortgage market, it's really forcing a lot of people to be renters," said Kip Paul, executive director of investment sales for Commerce Real Estate Solutions.
With the chaos in the home mortgage market, it's really forcing a lot of people to be renters.
–Kip Paul, Commerce Real Estate Solutions
Vacancy rates for all types of rental units declined over the past year with the exception of studio units, he said.
Paul said that 5 percent vacancy "is generally considered as tight as a market can be," or virtually full occupancy.
He said trends indicate that the area rental market will likely fall below the 5 percent benchmark sometime next year — making the market even more difficult for prospective renters.
"Despite the fact that we have moderate construction taking place currently, there is certainly not going to be enough supply put online to dampen those anticipated (demand) increases," he said.
In the past year, all types of apartment units experienced increases in average rental rates. The combined average monthly rental rate for all types of units is $754, up 4.7 percent compared to 2010.
The report stated that in past years, apartment communities west of I-15 had slightly higher vacancy rates, which is currently the case today. The overall rental rate on the west side is $743 compared to $766 for east-side properties.
Paul said the another significant factor that would impact the market is rising rental rates, which have — on a square foot basis — increased 3.5 percent in the past year and could climb even higher.
"We actually believe that rental rates might increase as much as 6 percent over the next year (to three years)," he said.
Over the past decade, the Salt Lake market has added about a thousand new rental units per year, on average. "Not a significant increase," Paul said.
In 2008, the number of new units under development has begun to climb, he said.
The report showed that there was 1,521 rental units built in 2008, with 2,442 units in 2009. The number of new units to the market dropped to just 819 in 2010, but is expected to climb to 2,749 units by the end of this year — and another 1,900 forecast to come online by 2012, Paul said.
Even with the new units, the area rental market will continue to struggle to keep up with increasing demand, according to Paul.
"There will be a good number of units coming online," he said. "But despite that pickup in activity, it's still going to be a landlord's market."
Email:jlee@ksl.com
