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Metros with the biggest rent drops
By BusinessWeek
Good news for renters
Rents are falling in major metropolitan areas as landlords scramble to find tenants in an increasingly competitive environment. Vacancies are climbing as renters downsize or move in with parents or roommates. Rents, especially starting at the end of last year, are being discounted heavily from New York to Los Angeles and in many cities in between. BusinessWeek asked Axiometrics.com, a Dallas-based apartment data company, to assemble a list of the 25 large metropolitan areas where the rate of rent declines accelerated most in the fourth quarter. Here are the top 13.
Read: Rents drop nationwide as vacancies spike
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Which is better — buying or renting?
Editor's Note: The metro areas are ranked by "rent drop," the change in the absolute rate of rent growth. For example, if rental rates increased by 1% in the fourth quarter of 2007 compared with the third quarter of that year and fell by 2% in the fourth quarter of 2008 compared with the previous quarter, then the "rent drop" would be 3%. The rents are calculated using a weighted average of all sizes of apartments and do not include single-family home rentals. The "effective rent" factors in any concessions offered by landlords. An average rent concession of 8.3% is equivalent to a one-month discount. The areas ranked are not cities, but metropolitan statistical areas as defined by the Census Bureau. Click here for full descriptions of the individual metro areas. Only metro areas with populations of at least 1 million were included.
Source: Axiometrics.com
Metros with the biggest rent drops
Salt Lake City
Rank: 1
Rent drop: 5.7%
Q4 2008 rent change: -2.3%
Q4 2007 rent change: +3.3%
Effective rent: $810.30
Salt Lake City, Utah's capital and seat of the Church of Jesus Christ of Latter-day Saints, saw a large slide in apartment rents during the fourth quarter. The slowing real-estate market has hurt the job market in construction and housing, though employment remains relatively tight. The unemployment rate climbed to 3.4% in November 2008 compared with 2.6% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 3.1% in the same period in 2007. Landlords on average are giving 2.2-week rent concessions.
Metros with the biggest rent drops
Nassau-Suffolk (Long Island, N.Y.)
Rank: 2
Rent drop: 4.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: +1.5%
Effective rent: $1,786.60
Apartment rents in Long Island's suburban counties have dropped as Wall Street layoffs and tumbling home prices have taken a toll on the economy. The unemployment rate climbed to 5.2% in November 2008 compared with 3.7% in November 2007. The apartment vacancy rate fell to 3.1% in the fourth quarter last year from 4.3% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.
Metros with the biggest rent drops
Raleigh-Cary, N.C.
Rank: 3
Rent drop: 4.0%
Q4 2008 rent change: -4.4%
Q4 2007 rent change: -0.4%
Effective rent: $752.70
Raleigh, the state capital and home of North Carolina State University, has been somewhat buffered from the recession until recently, in part because of its university, health care and government jobs. But apartment rents are falling as problems in the larger economy take their toll. The unemployment rate in the Raleigh-Cary metro area climbed to 6.1% in November 2008 compared with 3.5% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 5.3% in the same period in 2007. Landlords on average are giving 3.1-week rent concessions.
Metros with the biggest rent drops
New York-Wayne-White Plains, N.Y./N.J.
Rank: 4
Rent drop: 3.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: +0.5%
Effective rent: $2,672.20
The New York-Wayne-White Plains metro area is a vast area that includes New York City and the suburbs of northern New Jersey and Westchester County. Rents, along with home prices, had been growing in Manhattan until the financial crisis took hold in mid-September. Since then, rents have dropped as landlords adjust to the new reality. Major layoffs at financial firms and in other sectors have forced tenants to give up expensive apartments and move in with parents or roommates. The unemployment rate climbed to 6% in November 2008 compared with 4.6% in November 2007. The apartment vacancy rate jumped to 4% in the fourth quarter last year from 3.4% in the same period in 2007. Landlords on average are giving rent concessions of 1.1 weeks.
Metros with the biggest rent drops
Seattle-Bellevue-Everett, Wash
Rank: 5
Rent drop: 3.5%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.3%
Effective rent: $1,161.60
Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared with 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.
Metros with the biggest rent drops
Portland-Vancouver-Beaverton, Ore./Wash.
Rank: 6
Rent drop: 3.2%
Q4 2008 rent change: -2.8%
Q4 2007 rent change: +0.4%
Effective rent: $850.40
The Portland area, known for its environmental consciousness, microbrew beer and cultural offerings, has seen manufacturing layoffs spike in the last several months. The unemployment rate climbed to 7.2% in November 2008 compared with 4.7% in November 2007. The apartment vacancy rate jumped to 5.8% in the fourth quarter last year from 4.6% in the same period in 2007. Landlords on average are giving rent concessions of two weeks.
Metros with the biggest rent drops
San Jose-Sunnyvale-Santa Clara, Calif.
Rank: 7
Rent drop: -3.0%
Q4 2008 rent change: -3.0%
Q4 2007 rent change: 0.0%
Effective rent: $1,788
Silicon Valley, the nation's technology capital, is suffering from layoffs and dimming economic prospects as the recession deepens. The unemployment rate in the San Jose metro area climbed to 7.2% in November 2008 compared with 4.9% in November 2007. The apartment vacancy rate jumped to 4.2% in the fourth quarter last year from 3.5% in the same period in 2007. Landlords on average are giving rent concessions of one week.
Metros with the biggest rent drops
Charlotte-Gastonia-Concord, N.C.
Rank: 8
Rent drop: 2.9%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.9%
Effective rent: $736.40
The recession struck the Charlotte area later than it did much of the country, but the banking center is now getting hit. Layoffs are accelerating in and around Charlotte, home of Wachovia (now part of Wells Fargo) and Bank of America. The unemployment rate jumped to 8.1% in November 2008 compared with 4.8% in November 2007. The apartment vacancy rate jumped to 8.5% in the fourth quarter last year from 6.3% in the same period in 2007. Landlords on average are giving 3.1 weeks of rent concessions.
Metros with the biggest rent drops
Oakland-Fremont-Hayward, Calif.
Rank: 9
Rent drop: 2.9%
Q4 2008 rent change: -2.1%
Q4 2007 rent change: +0.8%
Effective rent: $1,515.40
In the Oakland area, across the bay from San Francisco, economic troubles have only gotten worse with the financial crisis. But it has also seen a rising tide of foreclosures. The unemployment rate in the area climbed to 7.2% in November 2008 compared with 4.9% in November 2007. The apartment vacancy rate jumped to 4.6% in the fourth quarter last year from 3.9% in the same period in 2007. Landlords on average are giving 1.4 weeks of rent concessions.
Metros with the biggest rent drops
Boston-Cambridge-Quincy, Mass.
Rank: 10
Rent drop: 2.8%
Q4 2008 rent change: -2.4%
Q4 2007 rent change: +0.5%
Effective rent: $1,634.20
The Boston area, home of Harvard University, the Massachusetts Institute of Technology and Boston University, as well as some of the nation's finest hospitals, is seeing damage to its financial sector. Thousands of financial-services layoffs have been announced, including major cuts at Boston-based State Street and Fidelity investment firms. The unemployment rate climbed to 5.0% in November 2008 compared with 3.6% in November 2007. The apartment vacancy rate jumped to 6.0% in the fourth quarter last year from 4.7% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.
Metros with the biggest rent drops
Santa Ana-Anaheim-Irvine, Calif.
Rank: 11
Rent drop: 2.8%
Q4 2008 rent change: -2.6%
Q4 2007 rent change: +0.2%
Effective rent: $1,625.60
The Orange County area, known for its wealth and for tourist attractions such as Disneyland, also became famous as the capital for subprime lending. Irvine was home to such lenders as New Century Finance Corp. and Ameriquest, and the collapse of the housing market damaged the local economy. Apartment rents by the end of last year were falling while the unemployment rate climbed to 6.1% in November 2008 compared with 4.2% in November 2007. The apartment vacancy rate jumped to 6.1% in the fourth quarter last year from 4.9% in the same period in 2007. Landlords on average are giving 1.7 weeks of rent concessions.
Metros with the biggest rent drops
Los Angeles-Long Beach-Glendale, Calif.
Rank: 12
Rent drop: 2.7%
Q4 2008 rent change: -2.6%
Q4 2007 rent change: 0.0%
Effective rent: $1,744.10
The Los Angeles area, home to movie stars and their luxurious mansions, has been suffering for some time because of falling home prices. The area's unemployment rate climbed to 8.7% in November 2008 compared with 5.1% in November 2007. The apartment vacancy rate jumped to 6.0% in the fourth quarter last year from 4.9% in the same period in 2007. Landlords on average are giving 1.6 weeks of rent concessions.
Metros with the biggest rent drops
Oklahoma City
Rank: 13
Rent drop: 2.6%
Q4 2008 rent change: -0.5%
Q4 2007 rent change: +2.2%
Effective rent: $568.50
The job market in Oklahoma City, the state capital and home of Devon Energy and Chesapeake Energy, remained relatively tight in 2008 thanks to the surging energy sector. Dropping oil prices are expected to have an impact on the economy this year. The unemployment rate in Oklahoma City climbed to 4.4% in November 2008 compared with 4% in November 2007. The apartment vacancy rate jumped to 7.7% in the fourth quarter last year from 7% in the same period in 2007. Landlords on average are giving concessions of one week.
Continue to BusinessWeek.com to view more large U.S. cities with the biggest drops in rent.
