Vacancy continues to fall in the 97,200-unit Milwaukee apartment market in the absence of new supply and the presence of strong demand. The second quarter saw another 160 units of net absorption as the vacancy rate fell 20 basis points to 3.5%, down 60 from a year earlier. The Class A rate was 3.4%, unchanged from the prior quarter, while the Class B/C rate was 3.6%, down 20 basis points. Nearly three-quarters of the inventory here is Class B/C.
Reis predicts 657 units will complete construction in 2012, all in the last half of the year. In July the 70-unit (56 market rate) Dwell Bay View completed construction in the Cudahy/S. Milwaukee submarket, but the vacancy rate increased just 10 basis points due to 35 units of net absorption. That brought year-to-date net absorption to 389 on the way to a forecast 1,315, the most since 2000. The vacancy rate is forecast to fall to 3.2% at year-end 2012, and then level off near 3.0% as increased new supply eventually matches strong demand. Three projects completed in September: the 152-unit The Enclave, the 68-unit 1910 On the Water, and the 217-unit The Moderne, all in the City of Milwaukee. The 94-unit first phase of Westlawn remained under construction for completion later in 2012, with 1,436 units already under construction for subsequent years.
Rent gains remain moderate, but stronger increases are forecast. In the second quarter of 2012 the average asking rent increased 0.6% to $861 per month and the average effective rent rose 0.8% to $827 per month, bringing the year-over-year gains to 2.4% and 2.9%, respectively. The second quarter Class A asking average of $1,093 per month was up 0.3% for the period, with the Class B/C asking average of $771 per month up 0.8%. In July, the overall asking and effective averages edged up 0.2% and 0.3%, respectively, but the addition of high-end new supply is forecast to drive strong gains of 3.7% and 4.7% for all of 2012. Subsequent annual increases are expected to be nearly as large, generally in the 4.0% to 4.5% range.