Drops in Bklyn apartment rents seen as slowing

In yet another sign that the residential market is stabilizing, vacancy rates at apartment buildings in Brooklyn are expected to rise only modestly this year following a significant increase last year and a large number of new units hitting the market, according to a recently released report.

Roughly 420 apartment units in Brooklyn came online during the 12 months leading up to the end of the first quarter, compared with just 30 units from the same period last year, according to the latest quarterly ApartmentResearch Market Update report by brokerage Marcus & Millichap. Overall, 1,160 units will be added to the supply this year, further bloating inventory in the borough. Despite the increase in supply, the vacancy rate is expected to notch up by only two-tenths of a percentage point to 2.6% in 2010. That follows last year\’s increase of six-tenths of a percentage point.

“The market is stabilizing; jobs are coming back,” said J.D. Parker, a regional manager at Marcus & Millichap. “We are still projecting population growth in Brooklyn for the next 20 to 30 years and the supply of housing in Brooklyn is constrained. We are cautiously optimistic.”

Asking rents will continue to fall this year, but at a slower pace, the report predicted. Average monthly rents in the borough are projected to slip 1.2% to $1,350 this year, compared with a steep 4.9% drop last year. Modest increases in asking rents are unlikely to happen until next year, according to Mr. Parker.

Landlords will continue to offer concessions, such as one to two months of free rent, this year to retain or attract tenants. “Landlords don\’t like to admit the inducements, but renters have become extremely demanding,” Mr. Parker said.

The picture was much the same in the sales market. According to the report, sales of apartment buildings in Brooklyn dipped 45% for the 12-month period ending in the first quarter of 2010. However, Mr. Parker noted that even the building sales market is showing signs of improvement. Twenty buildings in Brooklyn are currently under contract, he said. Also, the median sale price rose 8% for the 12-month period to $117,360 per unit. Meanwhile the per-square0foot median price increased 10% to $149. That compares with an 11% decline in the previous year.

“Buyers are coming back,\” said Mr. Parker. \”They feel the market is at the bottom or close to the bottom.”

The Marcus & Millichap report covers only market-rate apartments and does not cover the rent-stabilized or rent-controlled apartments in the borough.