Tonight I was at an informal meeting with the GBAR staff and Leadership. I was approached by the association executive, John Dulczewski, regarding some recent communications he had received from REALTOR member's who were concerned that the market had begun to shift in favor of tenants, a softening of the market if you will. My response was a qualified no...AND yes.
NO: In the middle of the market, meaning rents ranging from $2.00 to $3.00 per square foot or your fairly typical $1300 - $2000 1 bed or $1600 - $2500 2 bed, Boston is still facing a massive shortage of availability and the barriers to developing property at this price point continue to be substantial and for many developers insurmountable. This means most properties priced at this point continue to be in high demand and can be difficult to find for most renters. If you do find a property listed in good condition and in this price point you can expect many people to be interested in it and the landlord to continue to be in a position of strength.
Yes: At BLP we have been predicting a shift in the top of the rental market where an overproduction of apartments in the $4.00 - $5.00 per square foot price point is leading to an over abundance of supply. In 2010 Boston had approimately 8,000 "luxury" apartments. Today we have approximately 11,000 units and this number is expected to increase to 18,000 over the next 3-5 years. The question asked is, "Where is the demand coming from?" The answer is often, "From pre-existing apartments renters looking to upgrade to a new building or gain a new amenity."
Many people do not realize that the banks that structure the debt for the apartment community owners often set minimum rents that the property owners can charge in order to maintain their mortgages. In order to overcome this minimum rent management companies have turned to promotions such as free months of rents and compensating agents for introducing their customers as a way to subsidize the prospective tenants rent to make their properties more competitive against competing communities. The effective rent over the course of the first year may be reduced by 20% or more making the new luxury building an afforable option for many people who may not have considered them in the luxury market and removing those perspective tenants from the upper-middle rent market.
In consideration of the original question, is the market swinging in favor of renters, the answer is yes, as long as you can afford it! For the majority of renters, there is still little to no sign of the market softening and you need to jump on a good deal when you find one.