2017 Landlord and Tenant Trends
Atlas Real Estate Group greatly values you, our client, and appreciates your role in our continued success. We have had the pleasure of growing exponentially in 2017 with the acquisitions of ESR Management and Proform Real Estate Investment Services, growing over 1500 unit in the past three years. We thank you for your continued trust in us.
2017 has brought about change at a rapid rate and the evidence is everywhere- especially looking at the ever evolving Denver skyline. Over 9,100 new residential units are being built downtown with the majority being rental units. As a result of the new builds throughout the Denver Metro area, we are seeing a significant shift in rental rates. Privately held condos in the $2,500 to $4,000 per month range have been affected the most, with a downward trajectory in their rental rates as apartment buildings offer incentives that can be difficult to compete with. Condos closest to these apartment complexes are seeing rents decrease by $50 to $250 per month, depending on the size of the unit. Even condos that are not in close proximity to these apartment complexes are seeing rents level off and even begin to trend downward.
Negotiations for privately held condos are becoming increasingly challenging as tenants leverage the pricing and incentives offered at area apartment complexes to get better deals. There are more choices available now, affording tenants the luxury of selection and time. As a result landlords are having to do more to fill vacancies. With many units averaging 45 days on the market, landlords are increasing showings, loosening restrictions such as the “no pets” rule and bargaining more on monthly rent fees. Units in the $900 to $1,500 a month rent market continue to move quickly due to high demand, especially from millennials priced out of the larger inventory of luxury units.
Semi-detached and detached homes continue to fill easily, though they have not entirely remained unscathed by the changing market. As Denver has grown in popularity and demand for home ownership has risen sharply the last two years, we have experienced an increase in investment property purchases. The influx of rental inventory has allowed greater options for tenants and, similar to the condo market, they are able to leverage these choices into lower monthly costs and loosening restrictions such as the “no pets” clause.
Tenants to Watch
There is talk about “millennials” everywhere you turn and for good reason; the millennial or Generation Y is the biggest generation in US history at over 92 million people (source: Goldman Sachs Global Investment Research). Born between 1980 and 2000, their unique experiences and perspectives are creating what is called a “sharing economy” in which they rely on services that provide access to things without outright ownership of them, think Uber, Netflix, Hulu, Ride Share, etc. As they have begun to dominate demand in the rental market, offering rentals that cater to these needs will produce the greatest success. For example, they place higher importance on locations that have direct access to public transportation and alternative accessibility (such as walking or biking) to neighborhood amenities like shops and restaurants. They are also much more cautious about cost of living, compromising space for ideal location, seeking flexibility in lease terms and often taking on multiple roommates to share in the living expenses. They are not seeking the same things as we have previously seen, thus requiring a shift in perspective to capture these budding consumers.
Another unique market segment we see growing is the pet lover. We mentioned earlier that the “no pet” clause is a much bigger bargaining chip than it has been previously. As tenants gain power through greater availability, they seek to eliminate this clause through differing means. While dog owners can often skirt pet rules and deposits by seeking to make their pet a service or emotional support animal (which requires landlord compliance under the ADA and/or Fair Housing Guidelines), there are other animal owners that seek a haven for both them and their pets. Opening up leasing terms to be inclusive of people’s furry family, will see tenants that are willing to pay more up front with a pet deposit and even monthly.
As apartment inventory continues to saturate the rental market, rates are likely to further level off. In the next couple of years we do not anticipate much growth in pricing and we will see niche properties (those in specific locations, with more desirable amenities) take the spotlight. Considering the increased activity of the new generation of consumers and their propensity for technology, we will see a greater reliance in online searching capabilities and connectivity/responsiveness of landlords. In short, they want increased ease of access to what is available to them and greater transparency about the terms. Providing a trustworthy and open front will be critical. Also, a greater reliance on innovative marketing will be necessary. With more options available, it will be in the landlords best interest to focus on the uniqueness of every property so that it stands out from the crowd. And as the power shift continues to favor tenants, landlords will need to be evermore flexible on terms of lease.
Thank you again for your trust in us. We look forward to our continued relationship with you!
Nick Mertens, VP of Property Management
& your Atlas Property Management Team