July 2018

VeryApt National Rent Report

Analyzing downtown luxury 1BR rent price trends

Market Overview

The VeryApt Downtown Rental Index (VDRI) is up 0.8% month-over-month. Rents are increasing at a sluggish pace outside of the highest-priced markets. Substantial new construction continues to mitigate rent increases, especially in markets like Chicago and Philadelphia.

NYC rents continue to increase, while Bay Area prices have stabilized. SF drove much of the ultra-high rent market increases earlier in the year, but NYC is now the leader in rent increases for this segment. While new construction properties remain very promotional, list prices are climbing, especially in Hudson Yards and Midtown East.

Entry-level luxury units continue to struggle the most. While prices are trending upward with seasonal demand, few markets have seen meaningful improvements in entry-level luxury price point units. New construction targeting this subsegment is making it hard for properties to increase prices without losing leases to competitors.

VeryApt Downtown Rental Index

City Analysis

Group 1
+1.1%

Ultra-High Rent Markets: Median Rent Above $2.6K
Group 1 market prices are up 1.1% m/m, continuing a strong year-to-date performance. NYC leads price increases, as new construction properties firm up their prices after a very promotional start of the year. Bay Area prices are high but stable on a m/m basis.
Group 2
+0.7%

High Rent Markets: $1.8-2.6K Median Rents
Group 2 market rents increased .7% m/m. LA and Seattle drove most of the increases in this category, while Philadelphia and Chicago remain distressed. Entry-level luxury price point properties are struggling the most, as demand for this type of housing stock is well below expectations (at least for now).
Group 3
+0.7%

Medium-High Rent Markets: $1.6-2K Median Rents
Rents in Group 3 markets were up .7% m/m. Price increases above 2% m/m in Austin were offset by softness in the Miami and San Diego markets. Entry-level luxury price points have firmed up considerably in Austin, though other markets in this group are still having trouble increasing rents.
Group 4
+0.7%

Medium Rent Markets: $1.1-1.6K Median Rents
Median prices in medium-rent markets increased .7% m/m, reversing the slight decrease in pricing last month. Performance is mixed by geography. Baltimore and Atlanta are struggling, while Denver and Richmond are showing some signs of improvement.

Interesting Trends

NYC has plenty of concessions, but list rents are increasing. While there is no shortage of promotions at new construction properties in Midtown East and Hudson Yards, base rents are increasing as occupancy improves along with seasonal demand. Very few buildings have dropped their prices on a m/m basis; instead we’ve seen base rents increase $150-250/month though 1-3-month free offers on year-long leases remain. As a result, it’s still a great time to rent at a new property in Manhattan, just not as close to as good of a deal as it was 2 or 3 months ago.

Bay Area prices are high but stable on a m/m basis. Median San Francisco 1BR luxury rents remain above $3,500/month but are flattish m/m. While limited housing supply continues to keep prices high, the market appears to have reached a rational but high ceiling for the year. $150-200/month price decreases in larger properties with lingering vacancies in SoMa and The Mission are offsetting some increases in smaller-sized properties in Nob Hill and Pacific Heights.

DC rents continue to creep upward but are soft overall. As the summer has progressed and discounted units have rented, extreme deals at Dupont Circle condo buildings have disappeared. We’re seeing some small price increases across the whole market. That said, there are pockets of high-vacancy properties in Foggy Bottom and Arlington dropping prices below $2,000/month.

Chicago remains competitive for renters. Chicago rents are creeping upward with the peak housing season but are softer than expected. For context, Chicago luxury downtown rents are up 1.4% over the last two months while Manhattan rents are up 3.1% in the same period. There continues to be a lot back-and-forth promotional activity by neighborhood. For example, Magnificent Mile prices were very competitive last month but deals have now moved to River North and South Loop.

The Philadelphia market is soft. Luxury downtown rents in Philadelphia are flat m/m and soft overall. Across all luxury 1BR price points, properties are struggling. Entry-level price point inventory has increased on a m/m basis. The best deals are in Midtown Village, where new construction promotions are driving leases, followed by Rittenhouse Square, where properties that previously attracted out-of-state working professionals are finding themselves forced to compete on price. Overall, rents are down slightly over the last two months and we don’t expect things to get much better given the extreme seasonality in Philadelphia from grad students and medical professionals.

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