This article is found at: http://blogs.wsj.com/developments/2010/03/03/renters-poised-to-lose-thei...
By Emily Friedlander
New Yorkers briefly enjoyed a superior bargaining position.
Renters–the ones with jobs anyway–have been having a good run the past year or so. But the party may be drawing to a close. The evidence, apartment operators are gearing up to build new rental units.
This year, real-estate investment trusts, or REITs, are expected to start close to $1 billion in new multifamily projects, according to real-estate research firm Green Street Advisors. While that still is less than average, it is a significant increase over the $100 million of development starts in 2009.
They’re betting that limited new supply, combined with an improving economy, will lead to ideal market conditions nationwide starting in 2011 or 2012, writes Dawn Wotapka in Wednesday’s WSJ. From then until 2015 apartment investment trusts may start raking in cash, says one analyst who looks at apartment REITS. Good news for operators, but less so for renters. As operators begin to make more money and feel more confident about the market, they’re likely to cut back on concession and to raise rents.
In January, apartment vacancies hit a 30-year high and landlords scrambled to entice renters, even in New York City, traditionally a tough town on renters.
But already in Manhattan the days of mega-concessions seem to be seem to wrapping up, at least in the most desirable neighborhoods. In New York, Equity Residential, which has buildings on the Upper West Side, Chelsea, Murray Hill , the Financial District and elsewhere, said it has stopped paying broker fees for certain unit types. In better times tenants pay that fee, typically one month’s rent.
Landlords also are excited about demand. The 20-to-34 age group, prime renting age, is expected to increase by five million in the next decade, according to Hessam Nadji, managing director of Marcus & Millichap, a real-state-investment brokerage firm. People who moved home or who bunked with roommates during the downturn also might ink leases as the economy improves.
Of course, headwinds remain: A further drop in unemployment could push vacancy rates even lower. Still, we wonder if perhaps locking in a two-year lease is a good idea.