Report: 2006 a time for investors to return to fundamentals.

Modest but stable investment figures, continued conversion of multifamily properties to condominiums and declining vacancy rates contributed to a solid year-end performance for the apartment market.

Survey data released in the First Quarter 2006 RERC/CCIM Investment Trends Quarterly revealed apartments garnered 24 percent of the sales volume and 26.8 percent of the transaction volume when 2005 national property type data was compiled, putting the sector in second place behind offices, the perennial investment heavyweight.

According to the National Association of Realtors[R] Commercial Forecast, transaction volume for apartments at the end of third Quarter 2005 increased by 90 percent or $61 billion over the previous year.

The RERC/CCIM report showed the vacancy rate in the multifamily sector dipped to 5.7 percent, primarily due to increased condo conversions. The lowest vacancy rates were cited in New York (2.9%), Los Angeles (3.1%) and Miami (3.3%.)

Real Estate Research Corporation's fourth quarter 2005 required pre-tax yield rate for the sector increased 10 basis points to 8.4, the first increase in four years. "The key for serious real estate investors in this transitional environment is to recognize that in general, capitalization rates have compressed about as far as they will, and that for the near term, returns will come from price appreciation," said Kenneth Riggs, CCIM, President of Real Estate Research Corporation. "Investors should focus on the fundamentals with respect to vacancy rates, rents and other basics."

One-third of industry leaders who responded to RERC's fourth quarter institutional survey cited apartments as the best investment category. They rated the entire U.S. economy at 5.9 on a 10-point scale, up from 5.5 in third the quarter.