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Free Rent: Lease-Up Concessions Surge in Some Apartment Markets

Incentives Needed to Fill New Units

By Louis Rosenthal | Wednesday, June 14, 2017


It’s no secret that rent concessions are on the rise nationally, but before you deem this further evidence of a weakening multifamily environment, consider this: the more properties that are in lease-up the higher the concession offerings, regardless of underlying market strength, Axiometrics apartment market data.

And these large concessions are the difference in the effective rent vs. asking rent equation.

Consider, for example, the case of Atlanta, where rents grew by annual rate of 3.7% in May (more than 150 basis points above the national average).

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Atlanta lease-up properties offered, on average, 6.3% off the asking rent in May — the largest concession offering in the metro area this cycle. However, there were also 57 lease-up properties in May, the largest number of properties in lease-up this cycle.

Likewise, the Dallas market — strong by all accounts on the demand side — also is seeing large lease-up concessions offerings in the face of a ramp-up in new supply.

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On average, lease-up properties in Dallas offered 7.6% off the asking rent in May, based on 78 properties. While a step down from the cycle high of 88 properties in February, there are more properties in lease-up today than at any time between 2010 and November 2016.

Alternatively, look at Seattle, one of the top-performing apartment markets in the country.


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In Seattle, the average concession value was only 3.8% in May, and only 35 properties were in lease-up — which is still a relatively large number of properties given the size of the market, according to the apartment market data.

Lease-up properties work in a slightly different manner than stabilized properties. The goal of many lease-up properties is to fill as many units as quickly as possible, so sizable concessions (e.g. two weeks’ free, one month free, etc.) are not necessarily as rare for lease-up properties as they are for stabilized properties in favorable market conditions.

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As the above graph shows, while concession offerings among lease-up properties are at their cycle high in Atlanta and Dallas, the apartment data shows, concessions among stabilized properties are virtually non-existent (although part of this is attributable to the rise of revenue management software). If higher concession values result from increased competition (i.e., larger levels of new supply), then the vast gulf between stabilized and lease-up concessions demonstrates that the bulk of competitive pressures is currently concentrated among new properties. This also explains why Class B and C assets are outperforming Class A in many markets around the country.




Louis Rosenthal

Louis Rosenthal

Real Estate Analyst

Louis Rosenthal researches and analyzes current apartment trends in the United States and correlates them with economic indicators. He also studies the urban landscape and other metrics to develop in-depth reports and presentations for clients. Louis recently earned his Master of Science in Public Policy, focusing on housing, landuse patterns, real-estate dynamics and economic development. He combines that knowledge with his four years of practical experience in tax analysis, regression analysis and presentations to develop insightful analysis. An accomplished writer, Louis’ work has appeared on and Axiometrics’ blogs, among others.

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