Luxury Multifamily is Starting to Feel Rent Pressures
Renters are scaling back over economic concerns.
There is a surge of new apartment inventory starting to hit the market, most of it luxury rentals. While such buildings have had little difficulty finding tenants in the past, that may be changing, according to Zumper’s latest multifamily report.
CEO Anthemos Georgiades cautions that vacancy rates in such buildings are on the rise. The reason is that renters are scaling back due to fears about the economy, he says. “That means,” he says, “these new Class A properties coming to market in many cities will have a harder lease-up period than originally anticipated, putting downward pressure on luxury rental pricing.”
One exception is Miami, where new renters are disproportionately interested in luxury amenities, according to Zumper. Resort-style perks like concierge services, on-site restaurants and free fitness classes are increasingly common in Miami apartment communities.
According to the IRS, Florida’s adjusted gross income increased by $23.7 billion in 2020, the biggest jump in the country. “Add a hefty dose of international investment and a growing number of tech jobs across the greater Miami area, and it’s easy to see why Miami, in particular, remains one of the hottest rental markets in the country,” Zumper writes.
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In Miami a median one-bedroom rents for $2,840. That’s a 6% increase over last month, an 8% increase year-over-year and a whopping 61% increase from January 2020 when one-bedroom median rent in the city was $1,760.
Meanwhile, national rents continued to normalize in April, which marked the sixth month in a row of modest month-over-month changes in prices. One-bedroom median rent is up 6% year over year but down over the prior month in 39 of the top 100 cities analyzed; 35 cities are up slightly and 29 remained flat.
The upshot of what’s happening in the luxury sector this past month may trickle down to other real estate segments and “relieve pressure on the entire rental market,” says Georgiades.
Zumper found that Jersey City, N.J., became one of the priciest markets in the country, tied with San Francisco, long very expensive, for the second most expensive city in the country. (New York City still leads.)
Jersey City’s median one-bedroom rent hit $3,000, a 44% increase from March 2020. The reason for Jersey City is said to be its fast growth and appeal as a nice place to live for those leaving bigger cities in search of greater affordability. Many find its vibrant waterfront appealing as well as its proximity to New York City, where rents hit $3,570 a month. In fact, Jersey City has been dubbed “Wall Street West” since more than one-third of its private-sector jobs is in financial services.
Both North Carolina Raleigh and Durham jumped five spots in April with Raleigh’s median one-bedroom now at $1,420 or 2.2% month-over-month and a 22.4% year-over-year increase. Raleigh shares some of the same factors as Jersey City for rising prices.