The party's almost over for Washington area renters who have been getting deals because the market has been flooded with new units and because tenants were lured into homeownership by low mortgage rates, a key market analyst says.
While in March landlords offered one, two and even three months of free rent and managers of new buildings promised concessions such as free parking or a waiver of part or all of the security deposit, the breaks won't be around for much longer, predicts Gregory H. Leisch, chief executive of Delta Associates, an Alexandria-based division of Transwestern Co.
"By the fall leasing schedule, the tenants will know that the best deals are behind them and that they should have gotten in on them when they had a chance," Leisch said in an interview this week.
Leisch's predictions were seconded by an official with Archstone-Smith Trust, a Colorado-based company that has the largest apartment market share in the Washington area. "Last year we had spikes and valleys. But now we're seeing numbers that are really good," said James D. Rosenberg, president of Charles E. Smith Residential in Crystal City, a division of Archstone-Smith. The parent company owns and manages 22,000 garden and high-rise units in the Washington area.
The market is changing because Washington has been a job powerhouse, outperforming all other markets; the rent concessions have worked; and the national economy is improving, Leisch said. His firm analyzes trends in luxury and well-kept rental properties of 100 or more units. It does not follow smaller or more modest properties.
When the economy softens, "the kids move back home with Mom and Dad or they double up" in apartments or houses, he said. "Because people are feeling much better about the economy, there's a lot of un-doubling going on."
Another big factor locally is that many new buildings have been converted from rentals to for-sale condos. In 2003, developers converted about 600 rental units in the District and 1,400 units in the rest of the metropolitan area. In the first five months of 2004, about 1,400 rentals in the District switched. Another 3,600 planned rentals went condo in the suburbs.
As a result of the improved market, "vacancy rates are lower now than they were a year ago," said Leisch.
The area vacancy rate for the first quarter of 2004 was 3.1 percent, according to Delta Associates' most recent data. The rate for the same period a year ago was 3.3 percent.
The vacancy rate for the District at the end of the first quarter was 2.9 percent, compared with 4.5 percent a year earlier.
At the end of 2003, the vacancy rate area-wide was 3.2 percent.
Rents, on the other hand, are on their way back up, said Leisch.
For 2003, effective rents, after concessions were made, rose 2.5 percent area-wide but declined 1.7 percent in the District.
In the first quarter of 2004, effective rents area-wide were 3.9 percent higher than a year earlier. District rents were 2.7 percent higher than a year earlier.