From the Wall Street Journal:
Job losses took a heavy toll on the nation’s landlords last quarter, as rents fell across the country and vacancies jumped higher.
New York City took the biggest hit, according to numbers to be released Wednesday by research firm Reis Inc. Rent growth declined by 1.9% in New York, even though the city still has the nation’s tightest rental market, with vacancies at just 2.3%.
New York landlords have enjoyed big rent increases over the past few years, but that’s unlikely to continue in 2009. In the fourth quarter, three-quarters of multifamily buildings in the city exhibited negative rent growth, a big uptick from the past three quarters, when just 37% of properties saw negative rent growth, according to Victor Calanog, director of research at Reis. Today’s story in the WSJ —”Apartment Landlords Find What Goes Up, Does Come Down“— looks at how landlords are offering more incentives to keep apartments rented.
The Big Apple stands out among the cities that saw the biggest rent drops because it hasn’t been inundated by a glut of foreclosed homes or condos that have been converted to rentals. That “shadow supply” helps explain, in part, the 1.8% drop in rental growth in Miami or the 1.6% decline in Ventura County, Calif. Altogether, 56 of the 79 markets tracked by Reis had negative rental growth last quarter.
Average rents for U.S. apartments fell in the fourth quarter, as a sharp economic downturn and rising unemployment left Americans unwilling to pay higher prices, according to data released on Wednesday.
Rents fell 0.4 percent in the final quarter of 2008, the first decline since early 2003, the study by real estate research firm Reis Inc found.
The vacancy rate rose to 6.6 percent, a level last seen in the first quarter of 2005, and up from 5.7 percent a year earlier.
While few Americans typically move in the fourth quarter, as they face the onset of the northern hemisphere winter and several national holidays, the decline in rents shows that landlords are moving quickly to try to keep vacancies down, said Victor Calanog, director of research at Reis.
“The quantity of rental apartments might not be suffering as much, but the price paid by households to occupy those rental units is buckling under the strain, with landlords lowering asking rents and raising the amount of concessions they are willing to provide,” Calanog said.
From the Wall Street Journal:
The housing downturn started out as a boon to apartment landlords as troubled homeowners became renters again. But as the recession deepens, the good times for landlords are ending and many are offering concessions and discounts.
Figures to be released Wednesday by New York-based research firm Reis Inc. show that effective rents, which includes free rent and other landlord concessions, fell by 0.4% in the fourth quarter of 2008, the first time that rents have fallen since early 2003. For 2008, rents increased by just 2.2%, down from 4.6% last year, and the nation’s apartment-vacancy rate rose nearly one percentage point to 6.6%.
“It’s now clear that apartments are going to take a much bigger hit than what most people initially expected,” says Hessam Nadji, a managing director at commercial real-estate brokerage Marcus & Millichap, which is set to release a separate report Wednesday projecting no growth in apartment rent for 2009.
Even cities that posted healthy rent increases in early 2008, including San Francisco, Seattle and New York, are no longer immune from the chill as job losses in the professional-services sector reduce demand for apartments. In periods of rising unemployment, would-be renters double up in apartments or move in with friends and families.