13 Mar New Apartment Construction, Finally Slowed Rent Growth
New apartment construction has finally slowed rent growth — at least, at the high end…
In recent years, people looking to rent in Portland generally had to be ready to pounce on an apartment the moment they walked through the door, and sometimes even sight unseen.
But there’s a renter’s market brewing in the central core, where a flood of gleaming new apartments is coming online at once. That’s prompted the managers of those buildings to float move-in specials to entice prospective tenants, leaving competitors in more established neighborhoods to follow suit.
That’s giving renters more freedom to shop around for the best deal.
“There still are people who will apply on the spot, but I also see people who will call in and say this is my first of six appointments today,” said Megan Crosby, portfolio director for apartment developer Urban Development Partners. “They’re shopping the market.”
That increased competition is finally — albeit gently — putting the brakes on the explosive rent growth that has pushed up costs nearly 60 percent since 2010, according to the real estate data firm Axiometrics.
The numbers are telling: The average one-bedroom unit now runs about $1,094 a month, according to a survey conducted last fall by the apartment industry group Multifamily NW; in parts of the urban core, it can reach $1,200.
What relief the new construction is bringing, however, hasn’t yet reached the lower end of the price spectrum. Most free-rent specials are being offered on units that lease for at least $1,000 a month. Nor does it extend outside the central city, where residents displaced by rising rents are fleeing.
Both reports rely heavily on large, professionally managed apartment buildings. But the price trend clearly illustrates the upward trajectory has slowed from the eye-popping surges of last year.
Taking into account the free-rent offers, rates rose just 3.4 percent in January compared with a year earlier, Axiometrics reported. That compares with a more than 10 percent annual jump seen in January 2016.
Until recently, the practice of offering free rent or other concessions was mostly limited to new apartment buildings, which concentrated on filling empty units as quickly as possible. Now it’s occurring in buildings that have been open for years in Portland’s close-in neighborhoods.
“There’s no question that there’s softness within the urban core,” said Patrick Barry of the appraisal company Barry & Associates. “These new units are coming in, and they have some attractive pricing on them to get them full. All of a sudden they’re competing with … the renovated, older-vintage units.”
And more apartments were empty in January — 5.7 percent — than in any month since 2010, according to Axiometrics, which takes a little pressure off apartment-hunters. The number, however, is still low by historical standards.
But that’s not the case in many of the suburbs, where renters have fled in search of affordability. In fact, rents are now rising at a faster clip in most of those outlying areas than within city limits, according to Axiometrics. That, combined with higher transportation costs, puts pressure on consumers’ wallets and feeds into already-congested roadways.
Clackamas County recorded an 11 percent jump in rents in January, year over year. Prices also climbed 8.6 percent in east Gresham and 7.2 percent in Vancouver.
Capstone Partners, which owns or operates about 650 apartments in the Portland area, has been offering free rent and other specials in most of its properties, co-founder Chris Nelson said.
The exception was its 165-unit Burnham & Ash apartment development in Tigard, which opened last month.
“No concessions, and better than expected rents,” Nelson said in an email. “(There’s) limited new competition in this submarket, however.”
There’s plenty of new construction in the works. When the Portland City Council voted in December to require large multi-family buildings to include affordable units, builders rushed to get thousands of apartments in the pipeline before the new mandate took hold.
It’s not clear how many of those projects will actually be built, or what long-term effects the new policy will have on construction once the pipeline projects are completed.
It’s also not clear what will happen during the typically busier spring and summer months. Nelson said his firm’s apartment complexes are already seeing foot traffic pick up.
For now, though, there’s still evidence that renters at the high end of the market have more leverage than in the past.
At The Abigail, a mixed-income apartment building in the Pearl District, developer Bridge Housing is offering one month’s rent — that’s $1,450 — for one of 27 market-rate apartments included in the development. Seven of the units are vacant.
But for the 128 affordable apartments, reserved for families earning 30 to 60 percent of the median family income?
There’s a 400-person waiting list.
— Elliot Njus
Courtesy of Oregonlive. com/The Oregonian