Key Takeaways:
– Rental concessions are on the rise, even as rent prices remain high
– 30% of rentals advertised on Zillow in October offered concessions such as free parking or free months of rent
– Concessions peaked at 36.7% in February 2021, before falling to a low of 19.4% in July 2022
– The rise in concessions is likely due to the surge in new apartment construction, leading to increased competition among property managers
– Concessions are more common in cities with a recent construction upswing, such as Austin and Dallas
– 43 of the nation’s 50 largest cities have seen a rise in rental concessions compared to last year
– Salt Lake City has the highest concession rate at 54.4%, followed by San Jose and Washington, D.C.
– New Orleans has the lowest concession rate at 9%, followed by Miami and New York City at 14% and 15% respectively.
inman:
Thirty percent of rentals advertised on Zillow in October offered concessions of some sort, such as free parking or free months of rent.
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Rental concessions are on the rise even as rent prices remain sky-high, according to a new study.
Rent concessions — offers meant to entice tenants — are at their highest level in two years despite strong renter demand, according to a study released by Zillow on Monday.
Thirty percent of rentals advertised on Zillow in October offered concessions of some sort, such as free parking or free months of rent, according to the report. Over the past five years, concessions peaked at 36.7 percent in February of 2021, before falling to a low of 19.4 percent in July 2022.
The new upward trend can likely be attributed to the recent surge in new apartment construction that brought a new wave of rental inventory to the market, forcing property managers to compete more for tenants.
The current rise, however, also comes as typical rent prices are nearly 30 percent higher than pre-pandemic levels and annual rent growth just ticked back up after slowing temporarily.
“The pandemic era’s increase in concessions was a direct response to decreased renter demand. Currently, we’re witnessing a different scenario where the demand for rental housing is high, but there’s been a notable rise in supply,” said Anushna Prakash, an economic research data scientist at Zillow. “To differentiate themselves from newer, potentially more amenity-rich apartment buildings, property managers are stepping up their game, offering more incentives to attract potential renters with a broader range of choices.”
Zillow’s data shows that in cities that have recently experienced a construction upswing, concessions upswings are usually quick to follow. For instance, in Austin, Texas, which has roughly 66,000 new units, 44.8 percent of rentals on the market offered some form of concessions, a 13.4 percent increase from the previous year before those apartments came on the market. In Dallas, where 74,000 new units were added, 45.9 percent of rentals offered concessions, a 17.4 percent increase from 2022.
Forty-three of the nation’s 50 largest cities have seen a rise in rental concessions compared to last year, according to Zillow. The cities with the most concessions were Salt Lake City, where 54.4 percent of rentals offered concessions, followed by San Jose at 50.8 percent and Washington, D.C., at 49.6 percent.
The city with the lowest concession rates was New Orleans with only 9 percent, followed by Miami at 14 percent and New York City at 15 percent.
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Property Chomp's Take:
In recent years, rental concessions have become increasingly common in the real estate market. These concessions, which can include perks like free parking or free months of rent, are offered by landlords to entice potential tenants. Despite the high demand for rental properties, a new study conducted by Zillow reveals that rental concessions are at their highest level in two years.
According to the report, 30% of rentals advertised on Zillow in October offered some form of concession. This is a significant increase compared to previous years. In fact, concessions peaked at 36.7% in February 2021 before dropping to a low of 19.4% in July 2022. The recent surge in new apartment construction has played a major role in this upward trend. With more rental inventory available, property managers are now competing more aggressively for tenants.
Interestingly, this rise in rental concessions comes at a time when rent prices are nearly 30% higher than pre-pandemic levels. Despite the high cost of rent, property managers are offering more incentives to attract potential renters. This is particularly true in cities that have experienced a construction boom. For example, in Austin, Texas, where approximately 66,000 new units were added, 44.8% of rentals offered concessions. In Dallas, where 74,000 new units were added, 45.9% of rentals offered concessions.
The study also found that 43 of the nation's 50 largest cities have seen an increase in rental concessions compared to the previous year. Cities with the highest concession rates included Salt Lake City, where 54.4% of rentals offered concessions, followed by San Jose at 50.8% and Washington, D.C., at 49.6%. On the other hand, cities with the lowest concession rates were New Orleans, Miami, and New York City.
The rise in rental concessions reflects the changing dynamics of the real estate market. With increased supply and high demand, property managers are looking for ways to stand out and attract tenants. Offering concessions has become a popular strategy to differentiate themselves from newer, potentially more amenity-rich apartment buildings. As a result, renters now have a broader range of choices and can take advantage of these incentives.
In conclusion, rental concessions are on the rise in the real estate market. Despite high rent prices, property managers are offering more incentives to attract tenants. This trend is driven by the increase in rental inventory and the need for property managers to compete for tenants. As the market continues to evolve, it will be interesting to see how rental concessions impact the overall rental landscape.
