Vacancies growing in rental housing market
A recent survey conducted by CB Richard Ellis of Grand Rapids found that occupancy in the local rental-housing market fell by nearly 3 percent over just the past six months.
The occupancy rate for market-rate, multiple-housing units in Kent County at the end of the fourth quarter stood at 91.4 percent. At the end of the second quarter, apartment occupancy was 94 percent. The difference between the two rates means about 670 units in the market lost tenants over the last two quarters.
“The weakness in apartment demand both nationally and in Grand Rapids can be directly attributed to continuing job losses and rising unemployment,” wrote Jill Langosch, vice president of research for CBRE/GR, in the report.
Downtown had the highest fourth-quarter occupancy rate of the county’s five submarkets at 97.4 percent, while the southeast area had the lowest at 88.7 percent. The southeast sector has the most rental units at more than 9,600, which makes up 38 percent of the total market. Downtown has the fewest at 649.
Due to the declining occupancy, the average monthly rent in the county didn’t change from the second quarter: It remained at $574.28 per month or 72 cents per square foot.
“Most market participants reported no change or minimal rent increases on renewals, though a handful indicated that they were actually lowering rents to stimulate renewals,” said Langosch in the report. “For the most part, it appears that apartment owners have chosen to hold rents steady and use concession activity to incentivize leasing.”
Landlords offered a variety of incentives over the past six months, including giving away cruises and flat-panel televisions. The strongest incentive, though, turned out to be a staple: a month’s free rent for a year’s lease.
“This is a reversal of the previous quarter when most market participants indicated that concession activity was on the decline,” she wrote. “The increased concession activity is not unexpected, however, given the declines in occupancy and the fact that we are heading into the winter leasing season.”
The report also found the federal tax credit for first-time homebuyers helped contribute to the lower occupancy rate and that lending for new multi-housing projects continued to be virtually nonexistent.
At the time the survey was taken, three projects with more than 150 new rental units were under construction in the market. Downtown had two of those: The Gallery on Fulton and Thirty-Eight. The third, Landing Place, is in Kentwood.
“The newly completed Icon on Bond, formerly a condominium project, has been leasing units for several months,” said Langosch, “and has been well received by renters seeking a downtown address.”
CRBE/GR surveyed 107 multi-housing properties in the county. Each property had to have a minimum of 24 units to be included in the survey.