January 4, 2017

It’s Going To Be A Renter’s Market In 2017

A report from KJZZ in Arizona. “The short-term outlook for the Valley’s apartment market may be more attractive to renters than investors. Rent growth in the Phoenix market peaked in May 2016. That’s when the average rent jumped more than 8 percent from May 2015. Nick Fitzpatrick, an analyst with Axiometrics, said pent-up demand and job growth led developers to build about 6,800 new apartments in the Phoenix market last year. He expects about 6,500 new units this year, along with slower rent growth. ‘The amount of new supply that’s coming in isn’t really out of the norm for Phoenix during other cycles so I don’t think there’s any fear there that we’re going to see a bubble burst,’ he said. ‘That demand is still there so I think Phoenix is going to be okay.’”

From Twin Cities Business in Minnesota. “The past few years have been good ones for commercial real estate in the Twin Cities. But some signs indicate that the pace of deals is starting to taper. Some brokers in all sectors are seeing signals of caution. ‘We’ve seen kind of across-the-board slowdown in activity in the second half of 2016,’ says Steve Shepherd, a vice president with the Twin Cities office of Colliers International. ‘I think we’re seeing signs on the street that it’s slowing down even on [Interstate] 394, which was one of our hottest markets.’”

“Shepherd says that he’s hearing similar reports from his Colliers colleagues nationally. He notes that he’s seen both job growth and business confidence start to soften.”

From Bostinno in Massachusetts. “Good news, you savvy urbanite, you: Compared with the beginning of January 2016, median one-bedroom rent prices in the Greater Boston area are actually down a whopping 5.9 percent. According to Zumper’s national rent report for January 2017, the median price for a one-bed in these parts is now $2,250 per year, down 5.9 percent compared to last January, while a two-bedroom apartment will cost you about $2,600, down 2.3 percent year over year.”

The Miami Herald in Florida. “Good news, renters: It’s getting cheaper to live in downtown Miami, as developers deliver a bounty of new condos and rental apartments in 2017. In 2017, developers are expected to complete nearly 6,350 condo and rental apartment units, the most in a single year during this real estate cycle, according to the DDA. (For the first time, the majority of those units are rentals, reflecting Miami’s rapidly cooling condo market.) Developers already delivered more than 4,700 units in 2016.”

“In other U.S. cities, big jumps in the number of luxury apartments are leading to over-supply — and good deals for renters. According to the Wall Street Journal, landlords in New York City, Los Angeles and Houston have begun offering perks including several months of free rent, free parking and no security deposits. ‘Landlords are trying to retain tenants because [tenants] now have these new options,’ said Anthony Graziano, of Integra Realty Resources, who authored the report. ‘It’s going to be a renter’s market in 2017.’”

The Pittsburgh City Paper in Pennsylvania. “Pittsburgh’s luxury-housing boom will grow tired like a mule after a long day plowing the fields. It might not feel like it, with 1,500 luxury units under construction and slated for construction in 2017, but the apartment and condo boom that has taken over many city neighborhoods is headed for a cooling-off period. In fact, we predict luxury apartments could go out of style faster than whale-blubber torches after that Edison fellow invented the light bulb.”

“John Petrack, of the Realtors Association of Metropolitan Pittsburgh, says that while many new homeowners and renters moving to Pittsburgh are fancy chaps with large salaries, developers ‘probably over-developed’ luxury rental units over the last several years. ‘In terms of high-end rentals, because of the number of units online, that will become a relatively soft market,’ says Petrack. As a result, many of the luxury units will lower their rents or offer incentives to attract residents, according to Petrack.”

From BusinessDen in Colorado. “BusinessDen surveyed 23 large apartment buildings, 17 of them in 2015 and 2016, totaling about 6,300 units. Many apartments in the survey are part of the residential building boom sweeping the city over the past three years. Some landlords are pitching real deals; five of the 17 buildings polled twice, in 2015 and 2016, decreased effective rent. In Golden Triangle, for example, The Acoma used to be the only high-end apartment tower. In 2015 it rented one bedrooms at $1,945 a month and laughed at any prospects asking about a discount. Now it competes with the new 1000 Speer, called The Joule before it sold for a record price per unit.”

“Both towers have caved into doling out specials. The Acoma is offering a free month of rent, causing effective rent to drop 11 percent to $1,725 per month. At 1000 Speer, which claims it is 70 percent leased, the deal on the table for renters this December is far better than last year: one and a half months free, plus a $150 break on fees and three months of free parking. Effective rent comes out to $1,562 a month, even leaving the parking perk out of the equation. Compared to a new renter at 1000 Speer last year, a new renter today would have saved $450 in 2016.”

“The only other building to drop effective rent by more than 5 percent was 2785 Speer, a gargantuan complex with 332 units that towers over Speer Boulevard at the edge of the Highlands. That building dropped effective rent 9.5 percent in 2016. The march of new construction goes on in central Denver. At least 5,000 more units in central Denver are set to start leasing in the next two years, by a BusinessDen tally. Those new units pose competition for established properties, says Jonathon Papsin, a real estate broker at Colorado & Company who specializes in residential leases at high-end properties downtown and in Cherry Creek.”

“‘I struggle with understanding where rents are headed right now,’ Papsin said. ‘But base rents will have to come down, just because Denver wages haven’t kept up with rental raises.’”

From KPBS in California. “San Diego rent prices continued to go up last month, but the speed of that climb has slowed significantly. ‘San Diego saw really large rent increases in 2015 and early 2016 — in the order of 6 to 8 percent over a year ago,’ Woo said. ‘But starting in the middle of 2016 and continuing through this past month, those actually dropped quite a bit.’”