Economic growth is slowing in Salt Lake County and fewer people are moving in, a trend that should result in higher vacancy rates and minimal increases in apartment rental rates this year.
That forecast comes from a new survey by a Salt Lake-based firm that provides brokerage and counseling services for multifamily housing.
EquiMark Properties Inc. predicts that apartment vacancies will range from 7.25 percent to 8.25 percent this year, the highest since 1989 when the rate was at 8.6 percent after topping out at a whopping 20 percent in 1986.
Part of the reason for the rising vacancies in 1999, says EquiMark, was the negative net in-migration experienced along the Wasatch Front last year, the first time that has happened since 1990. There were about 2,000 more "move-outs" than "move-ins" last year and that trend could continue in 2000.
Thus, EquiMark looks for minimal overall rent hikes this year.
EquiMark president Mark B. Milburn said developers are reluctant to build new multifamily housing without the likelihood of near-term rent increases.
"Because of project economics and the difficulty of obtaining multifamily land entitlements, developers are exercising more restraint," said Milburn. "The results should be moderate growth and greater market equilibrium."
The prospect of increased vacancies in 2000 are a continuation of a trend that began in 1993 when vacancies in the county hit a 14-year low of 2.8 percent.
The rate has moved up every year since to 3.1 percent, 3.5 percent, 4.3 percent, 5.3 percent, 6.8 percent and 7.7 percent in 1999.
Vacancies have not been spread evenly throughout the valley, however. Last year, vacancies were higher on the east side at 8.2 percent compared to 7.3 percent on the west side, a reversal of 1998 when west-side vacancies were 0.5 percent higher.
The EquiMark survey shows that the average rent for an east-side apartment in 1999 was $630, vs. $589 on the west side. But the east-side renter got a bit more space for the money: an average of 850 square feet compared to an average of 804 square feet.
Compared to 1998, average east-side rent rates were $4 lower last year, while west-side rates were $15 higher.
EquiMark says the overall increase in Salt Lake County rental rates was 1.49 percent last year for an average overall rent rate of $614 per month.
That modest increase has created a more "renter friendly" market for apartment dwellers, says the report. Conversely, it creates a poorer market for landlords and developers.
There are 1,923 new rental units projected to begin construction this year but, as a rule, only three-quarters of proposed units usually get built, which would put the "real" number of starts at a more modest 1,450.
But despite the downturn, EquiMark says demand for suitable multifamily construction sites remains strong by both local and out-of-state developers, with land values ranging between $7,000 and $14,000 per unit depending on location.