CB Richard Ellis or CBRE Group says that the continued offering of luxury rental housing, together with lack of moderately- priced apartment units, plays a part in pushing the overall rental rates. This has caused middle- class renters to stretch their budget more but it gives an opportunity for multifamily investors.
According to worldpropertyjournal.com, the trend of developing luxury units started in early to mid- 2000s at Texas when developers see potential in luxury for- rent apartments. In 2006- 2007, apartments throughout Texas were leasing units for more than 40% higher than average rent in the market.
The trend continues and last year, 80% of the top 20% of 179,000 units across 62 markets were carrying rents. Rent premiums in Tampa and Los Angeles are now reaching 40%.
CBRE released a research and it says that, in markets where new luxury units are being developed, rents for existing apartments begin to grow. Luxury buildings that are no longer considered as new can also affect in increasing average rate rents.
According to wsj.com [Wall Street Journal], 82% of 370,000 multifamily rental units were in the luxury category. These luxury buildings are those who affect the rent in the top 20% of the market. Denver, Tampa, Phoenix and Baltimore's new apartment construction are all directed to high- end renters. 95% of new units in Atlanta are all included in the luxury category.
According to Susan Wachter, professor of real estate at The Wharton School of the University of Pennsylvania, "I don't believe there ever has been a time where we have produced so much luxury rental housing." Middle class renters and young workers are now trying to keep up in renting luxury units due to lack of options. Since the available ones are mostly luxury units, the average rent will keep up with the luxury state of the units.
