The Real Deal New York

Overbuilding is causing rents in even the hottest markets to plummet, freeze

Minuscule 0.5 percent gain in U.S. rents over July was the smallest increase since 2012
September 09, 2018 01:00PM

(Credit from left: Henk Monster, Wikimedia Foundation)

Timing is everything.

It’s a great time to be renting in America as a glut of new supply is causing rents across the country to take a nosedive. Meanwhile, the lag time between the planning and delivery of rental projects is hurting developers and landlords who are now feeling the crunch.

But the signs were there for the past few years, as Zillow’s senior economist Aaron Terrazas explained to Bloomberg.

“This is something that we first started to see two years ago in New York and D.C.,” he said. “A year ago, it was San Francisco and most recently, Seattle and Portland. It’s spreading through what once were the fastest growing rental markets.”

Best case, rents freeze, however in markets where the slowdown is more advanced, like New York, prices are falling. In the Big Apple this past July, Bloomberg reports rents declined 0.4 percent. The result, as The Real Deal has reported, is a rental market full of concessions, particularly in high-end developments.

“There is tremendous competition for tenants,” Seattle landlord Vulcan Real Estate’s spokesperson, Lori Mason Curran, told Bloomberg–though she noted the company’s expectation that the current market conditions wouldn’t last. “Over time, we think long-term demand is solid. But there is so much supply tamping down rent growth right now.”

According to Terrazas, most of the newly-opened rental buildings were first put into motion when yearly national rent gains were hitting 6.6 percent; that environment fueled the largest surge in rental construction in about three decades. [Bloomberg]Erin Hudson