GLOBAL - The US apartment market is in the early parts of a recovery, according to Pramerica Real Estate Investors.

Frank Nitschke, a principal at Pramerica, said: "One of the reasons for the recovery is that we are seeing on a nationwide basis the fewest new construction starts for housing in two decades. This isn't likely to change until at least the end of 2011."

He said this would lead to the value of existing properties increasing and allow for rent increases in certain markets. 

There are some markets around the US - including San Francisco and Phoenix, where rents have moved up by 6-7% since April - where rents have been increasing for the past several months. 

Demand for renters remains strong. Many segments of the population are more interested in renting an apartment than buying a single-family home, as they are concerned about the state of the economy and unemployment.

This year, there has been a big increase in transaction volume for apartments, Nitschke said.

"Through July of this year, the amount of deals completed for apartments has increased by 72% in comparison to what occurred for the same time period for 2009," he said.

"But you need to remember that last year the amount of transactions was way down due to so much uncertainty in the market."

Through July, the total volume of closed apartment deals was at $11.8bn (€8.6bn), which shows that apartment buyers are well on their way to outpace last year's total transaction volume of $14.6n, although it is still far from the peak for apartment investing in 2007, when total deal volume reached $101.5bn.

Apartment investors seem to have the most interest in gateway cities on the East Coast, such as Boston, Manhattan and Washington, D.C.

Cap rates for many core transactions seem to be happening in these areas in the 4-5% range.