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Journal North: Home | Sports | Opinion | Obits | Entertainment
Monday, June 22, 2009
17% of Units Sitting Empty
By Richard Metcalf
Journal Staff Writer
Santa Fe's stalled economy has had a dramatic impact on its apartment market with nearly one out of every five units sitting empty in May, according to a new report by the CB Richard Ellis Multi-Housing Group.
"We're hearing anecdotally from property managers that a good number of tenants are vacating apartments due to job loss, job transfer out of the area and other economy-related issues," said David Eagle, who with son, Billy Eagle, makes up the multi-housing group.
Apartment occupancy was down to 83.3 percent in May, compared to 93.2 percent a year earlier, according to the survey that the group's report is based on. Even more surprising, May's occupancy rate was significantly down from 90.2 percent in January — occupancy typically goes up from winter to spring.
Income-restricted apartments, with an occupancy rate of 81.5 percent, were doing worse than market-rate apartments at 84.3 percent, according to the May survey. The average monthly rent for a market-rate apartment is only about 10 percent higher than an income-restricted apartment.
The single biggest factor that drives apartment occupancy is job growth. Overall employment in Santa Fe dropped 3.1 percent in April from a year earlier, according to the most recent report from the state Department of Workforce Solutions. Hardest hit was the construction sector, which shed 800 jobs during the past year.
In contrast, the apartment market in the Albuquerque metro area has proved to be more resilient. The occupancy rate was 91.9 percent in May, compared to 93.6 percent a year earlier. The average monthly rent has held steady.
"Albuquerque has a more stable and diversified economy," Eagle said. "Our service and construction sectors have taken a hit, but other (job) sectors have held up better."
Albuquerque hasn't escaped the recession unscathed, however. Overall employment dropped 3 percent in April from a year earlier, according to the state. The combination of job losses and reduced hours at work has forced some renters to move in with family or double up in apartments with friends, Eagle said.
While Albuquerque didn't start to see to the recession's effect on employment until August 2008, Santa Fe has been in an economic slowdown for the past year-and-a-half. In its April report on Santa Fe's job picture, the state says, "Employment prospects in the local area have been fairly poor."
Renters in Santa Fe tend to be more transient than those in other cities, particularly at apartments with cheaper rents on the south side of the metro, Eagle said. They typically come from elsewhere to work in construction and tourism-related job sectors, both of which have been hard hit by the economic recession.
"When the economy turns down, away they go," Eagle said.
Apartments play a major role in Santa Fe's housing scene because it's the only way many people can afford to live there. As of April, the median home price — meaning half are worth more, half less — was $386,000 in Santa Fe, compared to just $175,500 in the Albuquerque metro.
"The differential between renting and buying is much greater in Santa Fe than in Albuquerque," Eagle said.
Average monthly rents run higher in Santa Fe, $769 compared to Albuquerque's $684, but the gap is much tighter than the difference between home prices. Rental rates are currently declining in Santa Fe, reflecting a trend in cities around the country.
Albuquerque is bucking the trend with average monthly rents edging up slightly, even factoring in concessions on rent that landlords offer to lure tenants. Two-thirds of the apartment properties tracked by CB Richard Ellis were offering concessions in May.
Neither Albuquerque or Santa Fe have big "shadow markets" for rentals, which are typically single-family houses or condos that no one wants to buy, Eagle said. Owners will put the unsold houses on the rental market, thus creating competition for apartment properties.
Along with such factors as rising unemployment and overbuilding, shadow markets have helped to drive down both apartment occupancy and rents in places like Phoenix, South Florida and Las Vegas, Nev., he said. "Our rental markets do face competition from single-family home rentals, but it is at a pretty normal level," he added.
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