Steep Decline Predicted for Apartment Concessions

DALLAS-North Texans who expect to receive as much as three months free rent when they sign a new lease for an apartment may be disappointed next year. “I think concessions will burn off by about 35% in 2005,” predicts Norman Eastwood, a multifamily investment specialist with Marcus & Millichap Real Estate Investment Brokerage Co.’s Dallas office.

Eastwood tells GlobeSt.com that many people who purchased houses during the low interest rate will be unable to hold onto their homes and will be forced back into apartments. That dynamic, coupled with 1.8% forecasted job growth, leads him to believe that occupancy will tick up two to three points and concessions will start to clear out in most submarkets.

However, Eastwood doesn’t believe that the recovery will be so strong that concessions will disappear completely. “Concessions are just really deep, and I can’t see any reason the market will recover with enough vigor within one year to wipe them out,” he notes. Apartment owners are now typically offering one month to three months free rent.