Rent Drop Persists Amid Affordable Housing Demand

Plus: Lower Manhattan office leasing volume is up 58% in October.

Rent Drop Persists Amid Affordable Housing Demand

Plus: Lower Manhattan office leasing volume is up 58% in October.

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Market Snapshot

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*Data as of 11/03/2023 market close.


Rent Decline Continues for Fifth Month Despite High Demand for Affordable Housing

Despite a general 0.7% decrease in apartment rents nationwide this year, cities like Boston and Oklahoma City defy the trend with rising rental prices.

Regional Disparities in Rent Growth: Rent increases in select cities starkly contrast with the nationwide decline, showcasing a regional rent growth phenomenon. Markets on the East Coast, such as Boston, Birmingham, Cincinnati, Cleveland, and Indianapolis, have seen rents climb by up to 4.5%. These areas are outpacing their Western counterparts, suggesting a geographically uneven economic recovery within the housing market.

Driving the Gap: The variation in rent growth is partly due to the uneven distribution of apartment supply. On the East Coast, even with a rise in new apartment availability, market operators have managed to maintain high occupancy rates, offering renters a variety of choices without sacrificing profitability. Conversely, West Coast cities have witnessed a softening market despite fewer new completions, as noted by RealPage.

Figure 3: Affordable New Rental Units Are Absorbed Faster in 2023Q21

Demand trends: In bustling cities like Boston, the return to office work has heightened the demand for apartments close to employment hubs. Additionally, the market is swiftly absorbing more affordable units, explaining rent hikes in cities like Richmond and Oklahoma City. Danielle Hale of points out that this preference for affordability puts pressure on the median rent, hinting at a shift in the market where areas offering affordable living options are gaining an edge.


Big picture: The current climate reveals a nuanced narrative: while rent growth has generally cooled, regions offering affordable living are not just resisting the downturn but are thriving. Cities tapping into this affordability trend are witnessing rent growth, suggesting that the key to a robust rental market lies in balancing supply with affordability, a challenge that could shape the future dynamics of urban living.


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  • Supply surge: Despite New York's new regulations, Airbnb's listings rose by 19% and revenue grew robustly in Q3 2023, with CEO Brian Chesky dismissing the rules' impact on its continued growth.

  • Rent growth: Apartment rent growth has softened, with prices down 0.7% YoY, but rents in cities like Boston, Birmingham, and Cincinnati have increased.

  • The lux life: Where Luxury Meets: Continental Realty Corporation enters the SoCal retail market with its acquisition of South Coast Collection, a 97% leased luxury lifestyle center.

  • Tech revolution: Apartment owners are increasingly turning to tech to centralize operations and improve efficiency in response to slow rent growth and high interest rates.

  • Deal-hungry: The National Retail Federation forecasts a boost in holiday spending, with shoppers' demand for value and deals expected to bring it back to pre-pandemic levels.

  • New record: State Farm's (STFGX) regional campus at CityLine in Richardson, TX, has been sold, making it the largest office sale in North America this year.

  • Bumpy leases: Yellow Corp. (YELLQ), a trucking company, faces disputes over unpaid rent and potential challenges to its bankruptcy process.

  • Unlocking untapped markets: Private investment firm White Wolf Capital Advisors plans to launch two ETFs focused on private equity and CRE, according to a regulatory filing. 

  • Navigating industry upheaval: Zillow (ZW) CEO Barton believes his company can "thrive" amidst industry turmoil as earnings beat estimates, despite litigation and regulatory scrutiny.

  • Office oasis: The South Florida office market rebounds with growing demand for prime buildings and more developers adding amenities.


Office Leasing in Lower Manhattan Up 58% in October

Manhattan Office Leasing Ticks Up 58% in October

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Office leasing in Lower Manhattan reached pre-pandemic levels in Q2, with October witnessing a surprising 58% surge in activity, reports the Alliance for Downtown New York.

Leasing activity surge: Lower Manhattan saw a significant boost in office leasing, with 2.6 million square feet signed in October, a 58% increase from September and a 63% rise year-over-year. This surge was propelled by four substantial leases, with nearly half of the activity involving deals over 100,000 square feet, notably extensions and expansions by key tenants like the NYC Administration for Children's Services, Ralph Lauren, Weill Cornell, and LinkedIn.

Stubborn vacancy rates: Despite the surge in leasing activity, the average asking rent in Manhattan has remained relatively unchanged, with a slight increase to $75.40 per square foot, still trailing behind the pre-pandemic average. The availability rate of office space stayed above pre-pandemic figures at 17.8%, indicating a persistent excess of vacant space.


Cautiously optimistic: While October was a particularly great month for Lower Manhattan, vacancies remain a concern. Leasing activity for the remainder of 2023 must significantly accelerate to match the square footage leased in 2022. According to Colliers, an additional 8–9MSF of leases would need to be signed by EOY to match 2022’s total. However, positive signs in retail and hospitality indicate a cautious optimism for NYC's economic revitalization.


📖 READ: Across the pond, London's historic office buildings are being transformed into luxury apartments with panoramic views of the Thames and Lambeth Bridge.

🎧 LISTEN: Charlie Munger reflects on his career and partnership with Warren Buffett, offers investment advice, and discusses his favorite investments on this episode of Acquired Interviews.

▶️ WATCH: Billionaire Don Peebles discusses current CRE challenges on CNBC's "Last Call" with Brian Sullivan.

🌐 DOWNLOAD: The Emerging Trends in Real Estate® 2024 report signals a "Great Reset" in real estate, indicating a shift to new norms and away from traditional models.

📊 EARNINGS: Cushman & Wakefield (CWK) report a $34M loss in Q3 due to declines in leasing and capital markets transactions. But CRE recovery is expected in the second half of 2024.


The Mortgage Bankers Association predicts that 2023's CRE finance (CREF) origination volumes will be over half of 2022's ($442B vs. $816B), with a slower recovery due to persistent high rates influenced by the Fed's policies, quantitative tightening, federal deficits, and other factors.

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