The Long Island apartment market continues to experience extremely low vacancy rates. Second quarter vacancy for 2012 is reported at 3.2%, actually down 10 basis points from the prior quarter and down 40 over 12 months. Vacancy rates below 4.0% are pretty much the rule here. The Class A rate is 4.9%, down 10 basis points over the quarter, and the Class B/C rate is 2.5%, also down 10 basis points. The extremely low B/C rate indicates how tight this 97,712-unit market is for all kinds of multi-tenant product. Neither construction nor net absorption has been particularly active here. From 2002 to 2011, just less than 3,000 apartment units were added, at an average of 293 units per year. This is not a large amount even for a relatively small market, but is reflective of the preponderance of single-family homes in what is essentially a suburban community. Net absorption totaled 1,152 units in that time span, or 115 per year on average.
The 210 competitive units completed in 2011 were met with 656 units of positive absorption, thus setting the stage for the extremely low vacancy that has prevailed since the beginning of 2012. Net absorption, after a modest (less than 200 units) beginning, took a dive in August by returning 64 units to the market. For all of 2012, Reis estimates net absorption at 754 units while vacancy will finish the year at 3.3%. Construction has begun to pick up. Reis reports three projects totaling 364 units completing thus far in 2012: The Avalon Rockville Centre (Building III), 139 units; the Plaza Landmark, 75 units; and the West 130, with 150 units.
Rents continue to gain ground. Reis reports average asking and effective rents of $1,611 and $1,581 per month, up 0.7% and 0.8%, respectively, for the quarter, and up 1.9% and 2.4%, respectively, year-over-year. Class A asking rents are reported at $1,932 per month, up 0.8% for the quarter, and Class B/C rents are reported at $1,476 per month, up 0.7%. August data show asking rents of $1,620 per month and effective rents of $1,589. Reis forecasts gains of 2.8% and 3.5%, asking and effective, in 2012.