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November 27, 2019

Report: NH-FF apartment vacancies at multiyear low

PHOTO | New Haven Biz An apartment complex in Stratford.
By Michael C. Bingham

Demand for residential rental units is outpacing both existing supply and the near-term apartment pipeline, resulting in a multiyear low vacancy rate.

So concludes the fourth-quarter New Haven-Fairfield County Apartment Market report released Wednesday by Marcus & Millichap.

Job creation by local employers and migration from metro New York continue to support household formation in the New Haven-Fairfield County region, says the report. The high cost of homeownership incentivizes many residents to rent, emphasizing the need for available units.

Over the past three years, apartment demand has exceeded new supply by more than 2,000 rental units, contributing to a 240-basis-point vacancy decline over that span to 3.6 percent in September. Vacancy has not dropped below 4 percent since 2010. (A 5-percent vacancy rate is considered to be a marker of healthy equipoise between supply and demand.)

The average effective rent is projected at $1,820 for the combined New Haven-Fairfield market for 2019, according to the report, a 2.4-percent increase over 4.3-percent rental growth between 2017 and 2018. The report cited “slowing rent growth in New Haven” as a contributing factor.

According to Marcus & Millichap, average monthly rent payments are advancing fastest in the Bridgeport//Danbury and Stamford//Norwalk submarkets, especially among Class A units.

Not surprisingly, rent growth for the year to date is strongest in the Fairfield County Class A market, up 3.2 percent over 2018 to $2,852 average monthly rents. The most affordable rents are still found in the New Haven Class C rental market, with a monthly average of $1,132.

Elm City sets the pace

The tightening apartment supply is reflected in construction trends. M&M projects completion of 870 new units in the marketplace for 2019 — about 400 units less than a year ago. That decrease includes four consecutive quarters of construction contraction.

But there is activity. Residential rental properties have come online across the region, with the city of New Haven pacing the number of new units hitting the market in calendar 2019, followed by Stamford and Norwalk. Between both New Haven and Fairfield counties, more than 3,500 residential units are presently under construction, with deliveries scheduled through 2021.

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