Historically high occupancy levels preserved the market from soaring vacancy rates during the downturn. Indeed, the peak rate of the latest cycle was reported by Reis at only 5.5% (second and third quarters 2009). The strength of demand that emerged in 2010 and that has continued since, accompanied by minimal new supply additions, quickly eliminated the earlier modest increases in vacancy. With market-rate net absorption for the first half of 2012 running at 265 units accompanied by no new supply additions, the vacancy rate had slipped to 3.6% by the second quarter, a decline of 10 basis points for the period, a loss of 60 year-over-year and the lowest on the firm’s books for this market since 2005. While 14 units of net absorption through July–August left the rate unchanged, Reis expects additional declines over the remainder of the year as the market continues to tighten.
The persistence of relatively low vacancy during the downturn did not preserve the market from significant rental losses, however (led by declines of 4.5% for both asking and effective averages in 2009). Meanwhile, the return of better conditions—and sub-4.0% vacancies—has been accompanied by only modest rent growth: per the date of this report all the losses suffered by the asking average had yet to be recovered (the effective average has performed somewhat better). Indeed, according to a late August report in the Ventura County Star the county’s “high unemployment rate, 9.4% in July, has been a factor in keeping rents from large increases despite high occupancy rates and the rising popularity of an apartment lifestyle.”
This, however, may be changing. At $1,443 and $1,407 per month as reported by Reis, second quarter asking and effective averages were up 0.9% and 1.1% from the quarter before and were up 1.4% and 2.0% since year-end—in the wake of the gains of 1.4% and 1.7% reported for 2011 all told. July–August brought additional increase of 0.3% to each rate. Indeed, while the gains will be moderate alongside the best produced by this market since 1999, they will be the highest nonetheless since 2007.
Construction remains subdued. No market-rate projects have completed in the county since 2010. Only two with a combined total of 350 units were underway per the date of this report, both for delivery in 2013. Breaking ground in April 2012, the 272-unit Artisan Apartments is expected to finish next December in Oxnard. And the 78-unit Cannery Apartments in the city of Ventura, which began last November, is scheduled for a June 2013 completion.
The year’s lack of new supply alongside some 650 of positive net absorption should result in year-end vacancy at approximately 3.0%. Gains of 3.0% and 4.4% are projected for the mean asking and effective rents for the year. Demand, moreover, exceeds the new supply due on line in 2013. Additional tightening and higher rates of rent growth are expected.