Lower Rents On The Way In Metro Phoenix
{not mentioned in this article is the outflow of people from the area}
Lower rents likely as more investors buy apartments
by J. Craig Anderson - Sept. 9, 2009 12:00 AM
The Arizona Republic
Rent prices are likely to fall significantly in the coming months as a growing number of commercial real-estate investors buy up struggling apartment communities, according to some local real-estate analysts.
The same phenomenon that has driven down home-sale prices appears to be occurring in the apartment market, they said, with cash buyers lowering prices as much as is necessary to attract paying customers.
As a result, average rent prices have dropped an estimated 15 percent or more in the past year, and they could fall another 15 percent in the coming year, one local analyst said.
Because cash investors don't have a loan to repay, there really is no bottom line at which to hold their rent prices, said Jim Kasten, a Phoenix real-estate analyst and investor.
The problem for apartment owners who do have mortgages is that they'll have to lower their rent prices, too, if they hope to remain competitive, said Kasten, co-owner of Kasten Long Commercial Group.
"Most every property that sold in the last quarter was either lender-owned or lender-controlled, which means a short sale," he said. "If I was a pessimist, I'd say rental rates are probably going to drop another 15 percent."
Phoenix analyst Bob Kammrath, who also follows the multifamily-housing market, agreed that investors paying greatly deflated prices for apartment buildings probably will push rents lower.
That's on top of severe cuts in rental fees apartment owners already have taken during the past year because of new competition from investor-owned houses for rent, said Kammrath, owner of Kammrath & Associates.
Official rent-price figures from Arizona State University's Real Estate Studies center show an average decrease in monthly rent of 5.6 percent during the past 12 months, but Kammrath said the actual reduction is closer to 15 percent to 20 percent.
The ASU numbers don't include concessions offered by landlords, which have become substantial, he said.
Valley apartment owners are advertising free flat-panel TVs, Nintendo Wii video-game systems and other perks to entice new tenants to their communities, including lots of free rent.
"I've seen some places offering two or three free months' rent if you sign a 12-month lease," he said.
Kammrath, who tracks monthly sales of apartment buildings, said the median sale price of Valley apartment buildings with 10,000 square feet or more has dropped from about $105 a square foot in all of 2008 to roughly $61 a square foot in the first half of 2009.
http://www.azcentral.com/business/articles/2009/09/09/20090909biz-apartments0909.html
Lower rents likely as more investors buy apartments
by J. Craig Anderson - Sept. 9, 2009 12:00 AM
The Arizona Republic
Rent prices are likely to fall significantly in the coming months as a growing number of commercial real-estate investors buy up struggling apartment communities, according to some local real-estate analysts.
The same phenomenon that has driven down home-sale prices appears to be occurring in the apartment market, they said, with cash buyers lowering prices as much as is necessary to attract paying customers.
As a result, average rent prices have dropped an estimated 15 percent or more in the past year, and they could fall another 15 percent in the coming year, one local analyst said.
Because cash investors don't have a loan to repay, there really is no bottom line at which to hold their rent prices, said Jim Kasten, a Phoenix real-estate analyst and investor.
The problem for apartment owners who do have mortgages is that they'll have to lower their rent prices, too, if they hope to remain competitive, said Kasten, co-owner of Kasten Long Commercial Group.
"Most every property that sold in the last quarter was either lender-owned or lender-controlled, which means a short sale," he said. "If I was a pessimist, I'd say rental rates are probably going to drop another 15 percent."
Phoenix analyst Bob Kammrath, who also follows the multifamily-housing market, agreed that investors paying greatly deflated prices for apartment buildings probably will push rents lower.
That's on top of severe cuts in rental fees apartment owners already have taken during the past year because of new competition from investor-owned houses for rent, said Kammrath, owner of Kammrath & Associates.
Official rent-price figures from Arizona State University's Real Estate Studies center show an average decrease in monthly rent of 5.6 percent during the past 12 months, but Kammrath said the actual reduction is closer to 15 percent to 20 percent.
The ASU numbers don't include concessions offered by landlords, which have become substantial, he said.
Valley apartment owners are advertising free flat-panel TVs, Nintendo Wii video-game systems and other perks to entice new tenants to their communities, including lots of free rent.
"I've seen some places offering two or three free months' rent if you sign a 12-month lease," he said.
Kammrath, who tracks monthly sales of apartment buildings, said the median sale price of Valley apartment buildings with 10,000 square feet or more has dropped from about $105 a square foot in all of 2008 to roughly $61 a square foot in the first half of 2009.
http://www.azcentral.com/business/articles/2009/09/09/20090909biz-apartments0909.html