Rental concessions are on the rise as landlords attempt to attract new tenants in a softened rental market, according to a recent Zillow study. The share of listings with advertised concessions increased from 16.2 percent in February to 30.4 percent in July. According to Zillow, only 12.5 percent of rentals advertised concessions in July 2019.
Zillow tracked six types of concessions; free weeks of rent ranked at the top, making up 90.8 percent of all promotions offered in the U.S. and reported as the top concession of choice in all but six of the 50 largest markets in America.
“Before the pandemic, rent growth was accelerating and the nation was seeing concessions dwindle. That trend reversed sharply after the pandemic hit in February,” said Zillow economist Joshua Clark. “In a softer rental market, landlords are trying to push the right button to bring renters into their space.”
According to Zillow’s 2020 Consumer Housing Trends Report, 55 percent of those surveyed reported receiving at least one concession in their rental agreement, with the most common being free parking (35 percent), free rent (34 percent) and reduced monthly rent price (23 percent).
In addition, multifamily renters are more likely to receive concessions than single-family renters (63 percent vs. 25 percent). But the numbers shift depending on region. In Washington, D.C., for example, 57.5 percent of listings advertised at least once concession. Meanwhile, Charlotte and Austin had the next highest shares (53 percent and 47.1 percent, respectively). And in some of the nation’s most expensive markets, concessions have flattened as rents drop. In New York, rents decreased 2.6 percent while concessions increased 8.8 percent.
“Concessions can often be a leading indicator of a coming price drop in that landlords will often offer them first, before reducing rent. If owners feel concessions are no longer moving the needle, they’ll reduce prices,” Clark said. “Many landlords prefer to offer a concession rather than cut rent and set a precedent that could linger when the market picks back up.”
According to Bevan White, vice president of market at Pegasus Residential, it has been a challenge for property managers to capture tenant interest amid the pandemic.
“When our teams switched to a virtual leasing environment in late March, they had to adapt quickly as they couldn’t physically show an apartment home with an in-person tour, one of the major tools we have to build value,” White said. “Teams have used teaser photos, pre-recorded walk-throughs of amenities and even personalized recorded messages to capture the renters’ interest before conducting a full virtual tour with the site team.”
“We have slightly increased concessions in some markets, and we have also focused on increasing the availability of smart homes as a way to add value to a unit instead of simply offering free rent,” White added.
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