Can Rents Rise in 2011?

Can Rents Rise in 2011?
Does anyone have high expectations for stellar rent growth in the multifamily marketplace in 2011? Probably not. How about a huge change in the unemployment outlook in the short term? Nope.

If 24-hour cities are having generational highs in vacancy and delinquency you can bet slow or no rent growth will also be prevalent in smaller markets... from Ipso to Indianapolis. There's no place to hide.

Following is information to support our expectations of limited rent growth next year. Mainly, our customers are suffering. Here's proof.

•Un-employment remains above 9%
•Social Security benefits will see no increase in 2011
•The president has ask congress to exclude pay increases for Federal workers for the next two years.

Based on Census estimates ending in December 2009, there are approximately 309 million people in the United States. Three states hold nearly 26% of the entire country's population: California, Texas and Florida. Here is the unemployment rate is these three states:

•California: 12.4% State Population: 36,961,000. Unemployed persons: 2,258,000
•Texas: 8.1% State Population: 24,782,000. Unemployed persons: 892,000
•Florida: 11.9% State Population: 18,537,000. Unemployed persons: 1,096,000

That's over four million people in just these three states. The real impact is that this represents four million households! With millions of people out of work and millions more seeing no increase in wages or government benefits it's hard to believe many property's will be experiencing very much organic rent growth.

As the cost of commodity's increase there is continued pricing pressure on the products we buy at the property level- carpet, fixtures, paint, etc. How do we pay for higher costs? Usually with rental increases.

To answer the question, can rents rise in 2011 I think the answer is... not much.

I'm not saying you cant grow revenue. I'm suggesting that we are long past sole reliance on rent growth to drive increasing revenue. Life as we knew it five years ago, with automatic 3%, 5% or 7% rental increases is not part of our immediate future.

About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. We discuss best practices in multifamily management and methods related to how to buy apartment complexes. Our focus is sharing strategies and tactics that can be implemented and measured. For more information, visit:

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