The vacancy rate of multifamily residential units in the Columbia market should tighten in the second half of 2017 as the pace of construction slows, according to a new report from Marcus & Millichap, a commercial real estate investment firm.
During the past four quarters, Columbia area developers completed 1,900 apartments compared with 1,200 units one year earlier, the firm said in its second quarter report for 2017. This year’s total includes 455 units for college students, 124 units classified as affordable housing, and 100 senior rentals.
Construction will fall off in the second half as the 540 apartments currently underway will be delivered in 2018, Marcus & Millichap reported.
Overall, there’s been a 120-basis point increase in vacancy rates year over year, settling at 5.6% at the end of the second quarter, the report said. Vacancy rates were highest in Class A units at 6.9% in June, up 300 basis points in 12 months. Meanwhile, rents in the Class A tier climbed 8.3% to $1,430 per month.
Across the market, the average effective rent rose 8.4% year-over-year to $947 per month during the last four quarters. A year earlier, the average rent climbed 4.2%.
Strong demand for Class C units pushed the average rent up 11.6% in the last four quarters to $724 month, the report added. The vacancy rate for Class C units was 3.7% in June.
The report noted that strong interest from out-of-state buyers contributed to nearly doubling sales activity over the past four quarters.
“Increase competition for marketed properties contributed to the average price rising 54% year over year to $67,100 per unit,” the report said. “New luxury buildings will trade for more than $200,000 per door.”
Looking ahead, the report says improving operations “will entice additional out-of-state buyers to the market, increasing the competition for available assets.”
As more buyers enter the Columbia market, strong first offers will be required to successfully acquire property, the report added.