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While some retail and office markets experience double-digit vacancies as the technology boom screeches to a halt, the apartment industry remains relatively stable with a steady 6% vacancy rate, according to a report by Palo Alto, Calif.-based Marcus & Millichap. In the past 12 months, apartment purchases have increased 5%.

"The industry has been very disciplined over the last five to six years and has not overbuilt markets," said Mark Obrinsky, chief economist for the National Multi Housing Council (NMHC). "Whenever there's been a hint of overbuilding, construction slowed very quickly," he said. Citing maturity in the multifamily industry, Obrinsky added that a slower economy actually may allow construction to catch up with demand.

In the following two surveys, the NMHC ranks the top 50 apartment owners and the top 50 apartment managers.

In one of the big stories of the year, Archstone Communities (11th on the 2001 ownership list), Englewood, Colo., and Charles E. Smith Residential Realty (33rd on the 2001 ownership list), Arlington, Va., reached a merger agreement on May 4. The transaction is expected to close in September, and was unanimously approved by the boards of both companies. The merged company, which will operate as Archstone-Smith Trust, will own 87,456 units.

Douglas Crocker, CEO of Chicago-based Equity Residential Properties Trust, which placed No. 2 on both Top 50 lists, pointed out that the health of the industry varies from market to market. "Some markets remain healthy, while some are deteriorating," Crocker said.

Rents in San Francisco and Atlanta will decrease this year because of overbuilding, while San Diego and Boston are boasting strong unit absorption and rent growth. According to Marcus & Millichap, apartment development in San Francisco will drop by 15.3% this year to a total of 2,100 completed units. "Based on the fact that you have a weakening economy that could fall into a recession, you've got an industry that's doing very well on a comparative basis," Crocker said.

Stan Harrelson, CEO of Seattle-based Pinnacle Realty Management Co., emphasized that consistent growth keeps Pinnacle ahead of competitors. "In the last year we've grown 10%, and that is what we project for this year as well," Harrelson said. Pinnacle Realty ranked No. 3 on the Top 50 management list, gaining one spot from last year. The company owns properties in 45 states and western Canada, with 29 regional and branch offices. Its strategy leans toward the maturation of existing properties rather than acquisitions.

Richard Burns, principal and head of conventional multifamily investment business for Lend Lease Real Estate Investments Inc., based in Atlanta and New York, said that quality management provides a means to beat competitors. "We have very intensive training and coordination procedures that focus on the fact that this is where people live," Burns said. "This is their home and community."

Lend Lease Real Estate Investments retained its No. 4 spot on this year's owner's list. Lend Lease bought almost $700 million in property in fiscal year 2000.

Property insurance and utility increases are some of the most significant concerns in the industry. These issues stem from economic problems and may force apartment owners to hike rent prices. Harrelson predicts the near future will be a "rough time" for property insurance because of losses in the past and lower returns.

Insurance in Florida, for example, has skyrocketed from an average of $120 per unit to more than $300 per unit. The cost of utilities also is increasing because of energy shortages in worldwide markets. Untimely deregulation in California has exacerbated the problem on the West Coast instead of ultimately lowering prices.

Burns said he thinks that the upper end of the multifamily market is starting to soften with the economy, and industry professionals should realize that the multifamily industry will eventually be affected by it. "One thing I've learned in my career is that trees do not grow to the sky," Burns said.

However, the discipline imposed by the public markets has prepared the industry for an economic downturn, according to Burns. For example, banks and construction lenders have balanced supply and demand with tightened lending standards.

Banks often require the developer to put up 30% equity or more in an effort to avoid the problems caused by the last downturn. "We haven't seen the kind of overbuilding that we've seen in other cycles," Burns said.

Despite the sinking economy, top multifamily companies are optimistic that their industry will continue its steady growth.

"I think the residential multifamily companies will do significantly better than Corporate America this time around if there is a recession," Crocker said. "Most of our markets are in balance, but there's not excess inventory being built. We should all produce reasonable profits and many of us should continue to produce earnings growth, which is an anomaly in a recession."