Bloomberg Businessweek September 21, 2020 pp30-31 |Economics| “From Hot to Not| “Vacancies in once-sought-after neighborhoods may herald a rent reset”
Photo from livabl.com . Not in article but they note that 1 bedroom apartment rents have fallen 3.6% YOY in Los Angeles to a median 1 bedroom cost of $2,170.
Data Presented
In Seattle, apartment rental-listings have increased from ~8,300 to ~22,000 vacancies from January 2019 to September 2020. Concessions offered as an incentive to lease also increased from being applied to ~1,000 units to ~8,200. Across the U.S. urban rents have decreased 2% but the reduction is closer to 4% in NYC, SF and Seattle. On the Pike-Pine corridor in Seattle, an attractive area for young staffers working for Amazon etc., rents have decreased 10% partly due to fallout from the COVID pandemic. Notable, attractions like restaurants and bars are largely closed. Some focused declines are caused by civic protests and subsequent police action in affected areas. Actions included, in some cases, having tear gas released in the area and protestors shuttling-away garbage bins for use as shielding from the police.
Summary of Article
Six months into the COVID pandemic American landlords have lost pricing power on lower demand stemming from the ability to work from home, relocating back to family homes, ability of some to buy a home due to low interest rates, shutting down of attractive aspects of urban neighborhoods-bars and restaurant and in part job loss. Prices for some properties in the Pike-Pine area have fallen 10% to $1395/one-bedroom. The new price point reflects inventory outstripping demand being up 125% in the Pike-Pine area versus 83% across Seattle.
While falling rents hurt ROI for urban landlords the reset may bring rents to a more reasonable level in hot markets like NYC, SF and Seattle. Igor Popov (Chief Economist at Apartment List) says “At some point, Amazon will have people come back [to F2F in-office work in the Pike Pine area].” COO Marc Coluccio (SolTerra) “We’re trying to see through the clouds.” They are pushing as a selling feature “purified air” in part due to COVID and in part due to smoke from forest fires in Washington State.