How Covid-19 is Affecting the Rental Market
As many social distancing orders stretch into their third month, renters everywhere have used their homes in new and unexpected ways. Apartments now accommodate Zoom happy hours, virtual meetings, co-working with roommates, at-home workouts and so much more. With these drastic changes to everyday life, it’s perfectly normal to re-evaluate the way we think about the place we spend the most time. So how did we get here and where do we see things going?
WHAT HAS CHANGED?
With 40 million Americans filing unemployment claims in the last 10 weeks, the U.S. economy, as well as the rental landscape is in the midst of a massive shock. As Americans struggle in unprecedented ways, many renters have been forced to cancel leases, downsize, and/or move to more affordable areas. In the face of this uncertainty, fewer people are listing homes for sale and we expect first-time homebuyers may further delay their purchases. In the apartment industry, lease renewal rates have gone from an average of 50% to around 85% at some buildings. This signals a delay in renters transitioning to buyers— with renters disproportionately either staying where they are, or seeking more affordable housing— which has created a more stagnant rental market in major metro areas.
WHERE PEOPLE WANT TO LIVE
Now that we are spending more time in our apartments, affordability, nice weather and outdoor space are more valuable than ever. We expect high cost / high density cities like New York City or San Francisco to export renters to lower cost / lower density cities like Denver, Nashville, and Atlanta. People will most likely continue moving to cities because of the abundant job opportunities, but trends toward remote work and a corresponding focus on affordability will make denser cities less desirable.
With renters spending more time in their apartments, it’s only natural to start focusing on what could be improved. People with studios will want one-beds, and people without balconies will now view them as a necessity. We expect the premium on apartments with outdoor space to go up for the foreseeable future.
Working from home is now the reality for many renters; which means impressive amenity areas, more space per unit, and fast wifi have become priorities. Many of our clients have adjusted their search in favor of two-beds and units with a den, over studios and 1-beds. Much of the recent apartment development has been focused on units with less square footage, so it will be interesting to see how this trend plays out.
THE NEW NORMAL
More than anything, the way people search for apartments has changed overnight. In the last 2 months, virtual and site-unseen tours have become the new norm as apartment communities limit or prohibit in-person tours. Access to content libraries, accurate layouts, and videos of specific units has become a necessity. Organizations that have taken the time to build up content libraries will see higher success rates, while traditional broker models that rely on in-person tours will have a more difficult time helping clients.
Because of increased uncertainty, several apartment communities have offered renters more flexible lease terms. Typically, once a lease has been executed—there is no option to change your mind. However, without the ability to see units in-person, some buildings are offering a “30 day guarantee” that allows you to back out of the lease risk-free if the unit falls short of expectations. Although this is not consistent across all rental markets, in order to stay competitive buildings might have to start offering this option to accommodate renters.
LIMITED AMENITY ACCESS
Many apartment buildings rely on impressive amenity spaces to attract and retain residents. However, in order to adhere to social distancing guidelines, many amenity spaces have been closed or limited capacity.
In this “New Normal”, apartment complexes will have to get creative with the amenities they can offer. Many will partner with local businesses to offer outdoor exercise classes, virtual workouts, take-out discounts, and other Covid-safe perks. Amenities are a huge part of a building’s competitive advantage, so the ability to adapt and offer relevant perks will be crucial.
With safety the top priority, leasing offices have reduced staff to the lowest levels possible. Buildings with multiple front desks often close all but one, and leasing staff has been kept to a minimum. Limited on-the-clock staff may result in leasing offices that are stretched more thin than they were before Covid-19.
WHAT THIS MEANS FOR YOU
Buildings are being more aggressive about retaining residents, while simultaneously struggling to fill vacant units. This is good for renters in two ways: buildings are less likely to increase rent at the end of your lease; and for those who do move, buildings will offer attractive rent specials in a bid to fill vacant units. It is common to find offers such as 2 to 3 months free, waived application fees, zero-down move-in costs, free parking for a year, and much more.
The deals are so good that the Wall Street Journal recently reported that “large apartment REITs offered more rent concessions on new leases in April than they have at any other time in recent years.”
The bottom line is this: as buildings face uncertainty, renters have the upper hand. Now is the time to shop for deals, negotiate renewal rates, and save some money on rent.
We’ve been in the rental industry for years, and we didn’t think apartment hunting could get any more difficult. Unfortunately, social distancing is not an ideal way to find the place you’ll call home for the next year. This unprecedented time has solidified our belief that renters deserve better. Sorting through thousands of listings, struggling to coordinate tours, and ultimately hoping for the best is not how anyone should have to choose their next home.
Our number one piece of advice is that it pays more than ever to have a team on your side. From finding deals to finally getting someone on the phone—renters now have way more to manage than they did before Covid-19. Having a dedicated team of local experts who know the best specials, have direct contact numbers, and are able to move more quickly will eliminate unnecessary stress and give you the confidence you deserve.
AptAmigo has a simple goal: to make finding an apartment easy and maybe even a little fun. With concierge-level care and an expert understanding of the local rental market, AptAmigo gives renters an easy alternative to a difficult process. Since 2015, AptAmigo has helped thousands of renters in Chicago, Denver, and Atlanta find apartments with VIP service and zero stress. The best part? It’s completely free.
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