A seven-year boom in the high-end apartment sector may be nearing an end. Landlords of luxury rental properties likely will need to cut rents and offer concessions as supply starts to outstrip demand across the country, The Wall Street Journal reports.
Landlords reportedly in New York already are offering up to three months of free rent on some developments. In Los Angeles, some landlords are offering six months of free parking. In Houston, landlords are reportedly even waving the security deposit on some rentals.
“This will be a very challenged leasing environment almost everywhere,” says Jay Parsons, MPF Research vice president.
Apartment rents have jumped more than 26 percent since early 2010. The growth has outstripped inflation and income growth. In 2016, rents showed a slowing of increases. Rents rose by 3.8 percent. That is down from a 5.6 percent year-to-year growth in the third quarter of 2015, according to a report by MPF Research.
A flood of new apartments have hit the market in recent years, and most of those reflect developers’ focus on the high-end sector. The number of upscale apartments emerging on the market, however, is outpacing the number of renters, and that gap is expected to widen in 2017.
For example, the New York Area is expected to have nearly 30,000 new apartments enter its pipeline this year. That is double the historical average, according to Axiometrics. What’s more, about 85 percent of those new apartments are considered luxury. Dallas will see nearly 25,000 new apartments compared to its long-term average of about 9,000, while Los Angeles is expected to see more than double its historical average.
Source: “Luxury Apartment Boom Looks Set to Fizzle in 2017,” The Wall Street Journal (Jan. 2, 2017) [Log-in required.]