Rumors of an impending slowdown in America’s rental market ran amok all through 2018. Ironically enough, the prices of individual houses haven’t changed much in the last year, despite many potential buyers being sure that they would rise in 2019. To this day, market experts can’t agree what’s in store for new home owners.
Sure enough, the rental market has only kept growing in the new year. It’s not teeming with activity, particularly in the new construction sector, but as the empty-nest sector increases, along with the number of millennial college graduates, unoccupied apartments across the country are becoming increasingly harder to find.
Nonetheless, the trends themselves remain in flux, reflecting modern-day cultural, financial, and societal developments.
A term traditionally used when marketing single-family homes, curb appeal is becoming a big selling point for apartments. Of course, rental interiors are still highly scrutinized, but as more people continue to use them as long-term housing, they increasingly want to live in buildings with exterior designs that dazzle. Studies conducted by the American Institute of Architects found that prospective tenants want contemporary facades on their apartment buildings, with open, oversized glass walls in the lobbies and entryways.
Today’s renters want more than energy-efficient kitchen appliances. Their concerns now include the quality of indoor air, the way their buildings are incorporating sustainable features into both individual units and outlying areas, and whether or not the building designs are green certifiedand sensitive to reducing their carbon footprint.
Big City Rebound
For the past few years, smaller cities have garnered more renters per capita than larger ones. Outlandish costs of living have kept many away from places like Washington, D.C., New York City, and San Francisco, all of which suffered losses in rental revenue over the past several years. Still, these metropolises are expected to make a big comeback in 2019.
Green Street Advisors, a leading real estate analysis and research firm, recently reported that: “Gateway markets’ relative pricing power is expected to return in 2019, though at a much narrower margin than historically. In non-gateway markets, job growth is robust but slowing, and new supply and incremental pressure toward homeownership should weigh disproportionately on rents over the next five years.”
Rental Rates Expected to Drop
Exorbitant rent increases dominated many sectors over the past few years, driving many tenants to smaller towns with fewer jobs. In 2019, rent increases are predicted to be smaller. Of course, this is dependent on things like urban development holding steady and the continued rise in homeownership among maturing millennials. According to commercial real estate data and research firm Yardi Matrix, rents increased by 3.1 percent in 2018. The Urban Land Institute predicts that percentage will drop to 2.5 in 2019 and 2.0 in 2020.
Despite all the brouhaha over affordable housing needs and the growing number of retirees seeking apartment options, there doesn’t seem to be a big boom in new apartment construction on the horizon. Real Page Analytics recently reported that even though new apartments were going up everywhere from 2012 through 2017, only 320,000 new units were built last year, with roughly the same number expected to be unveiled in 2019.
Paula Munger, the director of research for the National Apartment Association (NAA), explained this trend. “(The slowdown is) primarily a result of difficulties delivering new apartments due to higher construction material and labor costs, construction labor shortages, and general barriers to construction, whether in the form of regulations, complicated approval processes, or community opposition to new development.” She added that it’s possible apartment construction permits may be on the rise later in 2019, “…especially given the supply shortage of for-sale single-family homes and rising mortgage interest rates.”
Courting Contemporary Concerns
When all the hard facts regarding pricing, environmental concerns, and the job market have been discussed ad nauseum, the all-important amenities of apartment living become the focal point. The NAA found that flexible work and social gathering areas in apartment buildings were among renters’ top concerns, along with secure onsite lockers for deliveries. Remote jobsare becoming more common with each passing day, so it makes sense that telecommuting renters would place more importance on comfortable, semi-private work spaces with unrelenting internet connectivity.
The presence of food trucks and other nearby independent eateries is another top priority for renters in 2019. On top of that, renters with pets rank local parks and spa/grooming services high on their lists of must-haves.
Paula Munger adds: “Pets, packages, and social events are still a big deal, and anything that makes a resident’s life more convenient, including smart-home tech, (is important).”