Much like beachgoers in San Diego, rental property managers and owners have been experiencing nothing but sunny days as of late, and, according to more than 500 industry professionals, they may only be getting brighter.
In the 2015 Rent.com Property Owner and Manager Market Report, published earlier this month, responses from property managers painted a rosy picture of the current rental market. Of the 500-plus who took part in the survey last month, 46% reported a decrease in vacancies over last year. The report, citing U.S. Census data, says the national vacancy rate in the second quarter of 2015 was 6.8% for rental housing, down from 7.5% from the same time in 2014.
With a lower vacancy rate comes more power for property managers, says Niccole Schreck, senior brand manager for RentPath, the parent company for Rent.com. “Until vacancy rates increase,” she says, “property managers are going to continue to have the upper hand because renters need a place to live. There’s no way around it.”
Consequently, of the property managers who took part in the survey—all of whom are RentPath clients and list at least one property on Rent.com—55% said they’re less likely to offer concessions or lower rents, and 64% said they’re not doing anything different to fill vacancies.
Schreck says RentPath itself is seeing higher traffic: a 21.1% increase in leads during the first half of 2015 compared with 2014.
Elaine De Lude, chief marketing officer for ROSS Management Services, which manages 28 communities in the Mid-Atlantic, says vacancies are down 1% from last year and that the company has strategically reduced its marketing presence. “We’re doing more with less at this point,” she says.
“We’ve seen just a tremendous amount of traffic at 99% of our properties,” says Andrew Kadish, president of Rockville, Md.–based CAPREIT. “I wouldn’t say we’re doing anything drastically different. It’s just getting back to basics of good customer service.” CARPEIT manages nearly 60 communities across the nation, and vacancies have dropped 1% to 2% in each of them over the past 12 to 18 months, he adds.
For Schreck, the rental market’s growth can be summed up in three words everyone who took a high school economics class knows well: supply and demand. “More people are renting, and apartment construction just can’t keep up,” she says.
Both ROSS and CAPREIT have raised rents in the past year, which is in line with 88% of the property managers who took part in the survey. “It’s based on the supply and the demand,” De Lude says. “If the supply is limited, then we increase the rents.”
“In many markets, there is just so much more demand than supply,” Schreck adds. “We’ll continue to see these high rental rates and increases in rental rates.” If property managers price their apartments competitively, she continues, “they’re going to be able to fill their vacancies. Renters need a place to live whether they consider it affordable or not.”
Kadish says we’re in the midst of a change in the U.S. populous, “from the age of homeownership to a true renter’s economy. That’s not a dirty word. It is a good thing.”
Adding to that trend are millennials and homeowners who are dumping their mortgages for leases. According to the Rent.com report, 54% of property managers reported seeing an increase in the number of former homeowners seeking rental apartments. Forty-five percent said they’ve noticed an increase in the number of millennial renters.
According to Schreck, both increases have similar causes. Renters have more flexibility to move, don’t have to worry about maintaining a home, and, above all else, she says, it’s often less expensive to rent, especially for millennials with mountains of student-loan debt.
Both De Lude and Kadish say this trend of more interest in renting and lower vacancy levels will continue. “There’s probably a couple pockets where there’s new construction and those rents may remain somewhat flat,” De Lude says, “but that’s going to be very submarket specific.”
“We are a renter’s economy now,” Kadish reiterates.