YOUR MONEY: Office And Home Rent Will Keep Rising And Rising
KHQ.COM - Paying rent is getting more painful for renters across the country in the face of rising demand and tight supply.
the commercial and residential real estate markets are seeing
increases, and more are expected in the months and years to come.
Office construction starts were at the lowest level since 1960, the oldest data
available from McGraw-Hill Construction; and that means there will be
less space available for companies looking to rent or expand their
It's also bad timing for people who have been spooked
by, or pushed out of, the residential housing market and have decided to
rent instead of buy. Home ownership in the United States is at historic
lows, but at the same time rental prices are on the rise.
Rent for a primary residence increased 2.5 percent in December,
compared to the same month a year earlier, according to the Consumer
Price Index. And Reis Inc.'s research shows that rents hit their highest
level since 2007 last year, reaching $1,009 a month average rental
price. At the same time, the company found, the vacancy rate dropped to
5.2 percent, from 6.6 percent last year.
continued to tighten sharply in the fourth quarter, bucking seasonal
weakness typical of the colder months of the year," said Victor Calanog,
vice president of research & economic for Reis, in a report on the
apartment sector. "In just two years after hitting all-time highs of 8
percent at the end of the tumultuous year that was 2009, vacancies have
not just recovered, they have surpassed previous lows."
Ironically, rising rents are actually making homeownership more
attractive. One study by Trulia.com, a real estate research firm, found
that "based on current market conditions, buying a home is cheaper than
renting in 74 percent of major U.S. cities."
On the office rental side, this economic downturn has different from past ones, Calanog wrote.
downturns for the office sector were complicated by overbuilding; this
time around, the massive decline in aggregate demand at least isn't
weighed down by a supply glut."
Unfortunately, that means the
squeeze is on for renters from all walks of life as vacancy rates drop
in the face of further shrinking of supply. Fewer places to rent means
landlords have the upper hand when it comes to what they can ask. And
that will probably be the case for the next few years, said Mark Stapp,
professor of real estate practice at the W.P. Carey School of Business at Arizona State University.
the residential side, there will be a push toward higher rents for the
next two years, he explained, while commercial real estate rental prices
may continue to increase for the next three to five years.
supply side is so constrained because no body has been building for
years," he said, because of the economy and the difficulties businesses
and developers faced getting loans.
is beginning to open up a bit now, it will take years before real
estate firms are able to build enough space to meet the growing demand.
It's good news for landlords, he added, who were forced to make
concessions in recent years because of weakened demand, but it will be
tough sledding for apartment and office dwellers who have to pay the
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