2011 Year-End Apartment Survey

In 2011, Price Edwards & Company surveyed 317 market rate, student and senior housing units totaling 62,703 units in the Oklahoma City metropolitan area; of which 266 properties totaling 57,978 units were standard apartment housing. While much of the United States struggles to emerge from the most severe recession in the post World War II era, Oklahoma City delivered another year of declining vacancy and increased rents. Although not as robust as the mid 2000's, the economy seems to be a little more solid than in the past two years. Jobs are being modestly added and consumer confidence is slowly increasing; still many issues remain uncertain which causes consumers to opt for renting rather than home ownership. The apartment sector has proven to the most resilient during economic downturns, delivering superior returns during recessionary periods.

For 2011, properties experienced an increase of 1.1% in occupancy to an average rate of 89% across all classes as compared to 2010. Market rental rates increased across the board for all floor plans, with the efficiency units having the largest increase of 2.5% to the current rate of $0.88 per square foot. One bedroom units had the lowest percentage increase to $0.75 per square foot which is an increase of 2.7% as compared to 2010, two bedrooms up 1.5% to $0.68 per square foot and three bedrooms increased by 3.1% to their current rent of $0.66 per square foot. All property classes, with the exception of Class D, experienced increases in rent occupancy, with the largest increase in Class A properties of almost ten percent in rents alone. This large increase is from a combination of limited construction over the past year and the increased demand for quality rental housing, both of which are expected to continue as fundamentals strengthen on both the supply and demand side over the next few years. Although the occupancy rate overall was up year-over-year 1.1%, there were some submarkets which fared better than others. Submarkets which posted gains were North Central with a 5.7% increase to 93%, Northwest went from 81% to 83%, an increase of 2.5%, Edmond and Mustang-Yukon both up about 3.3% with Edmond at 96% and Mustang-Yukon just below at 95%. Although three of the submarkets had an increase in vacancy, they were very minimal and all only one percentage point below last year. South Oklahoma City has a rate of 89%, Midwest City-Del City at 88% and Moore- Norman at 91%. It is important to note that although these markets had a slight decrease in overall occupancy, they all had increases in rental rates as indicated above.

We surveyed 25 senior housing properties with a total of 3,380 units. Senior housing occupancy increased 1.1% to 95% as compared to 2010. All unit types were up from 2010 with efficiency units renting at $2.65, one bedroom units at $1.87, two bedrooms at $1.99 and three bedrooms renting for $0.63. Senior properties continue to be priced above market rate properties for rent and sales values primarily due to the higher cost of construction as well as a higher average operating expense. As more baby boomers retire, senior properties will see a surge as more retires opt for some type of assisted or amenity rich senior housing. Eight student properties were surveyed this year for a total of 1,389 units, or as most student properties are rented, 4,544 beds. Occupancies increased 2.1% from 94% in 2010 to 96% in 2011. Student rental rates also increased by 2.1% from $522 in 2010 to $533 this year, this totals $1,582 per unit on average. Although some experts say the student market is slightly overbuilt, the statistics show that this niche property type is not in decline, rather is stabilized and in demand. Resort style amenities and planned community events are desired features for student housing; with new developments pushing the envelope on what is available. Older properties are going to face challenges to compete, ultimately needing expensive capital investments. To be successful, a property must provide a distinctive and competitive edge that positions the property better than its peer properties. Timing for new construction is crucial and can potentially be a significant blow to the bottom line if not completed before the ever important leasing season just prior to new semesters. Going forward, successful investors will have to have a strong understanding of student