Author: Benton

Zumper’s year-end report: Interest rates, recession worries weighing down renters

Posted on by Benton

Worried consumers. That’s what Zumper’s Annual Rent Report for 2022 uncovered. The renters whom Zumper surveyed for its end-of-the-year report agreed that the U.S. economy was slipping into a recession, and they expressed little to no confidence that the economy would improve anytime soon.

The report, then, is a bit of a downbeat way to end the year. It’s not surprising, though, considering the uncertainty that comes with rising interest rates and persistent inflation.

A total of 76% of the respondents in Zumper’s year-end report said that they think the United States is in a recession. And 62% of respondents said that they weren’t confident in the country’s economy. A total of 63% said that they had recently moved because their monthly apartment rent was getting too expensive.

In a sign that more renters are struggling economically as 2022 draws to a close, 31% of respondents told Zumper that they were behind in their rent, while 36% said that they are spending more than 45% of their incomes on their monthly rent.

The country’s economic uncertainty has hit the multifamily market, that is made clear in Zumper’s report. According to Zumper, the national median one-bedroom apartment did rise in December, hitting $1,497. But rent growth has definitely leveled off, with the national median one-bedroom rent rising less than half of a percentage point in December.

The national median rents for two-bedroom apartments actually fell in December, dropping 0.1% to $1,822.

What will the future bring for the apartment market? That’s unclear. But demand for multifamily living doesn’t appear to be tapering off, largely because it is so expensive today to buy a single-family home. According to Zumper’s year-end survey, 28% of respondents said that the traditional American Dream no longer involves owning a home. And the percentage of respondents who said that now was a good time to buy a home? Just 27%. A total of 32% of survey participants said that rising interest rates have deterred them from buying a home this year.

Tech industry struggles another blow to weary office sector

Posted on by Benton

Another challenge for the U.S. office sector? Tech companies, which for so many years remained in constant expansion mode, are finally beginning to reduce their payrolls to save money. They’re also shrinking their office footprints to slash even more costs, another blow to an already beleaguered office sector.

That is the takeaway from the December office report recently released by CommercialEdge.

It’s yet another report highlighting the struggles of the office sector since the start of the COVID-19 pandemic. Just consider some of the numbers CommercialEdge highlights:

The average U.S. listing rate stood at $38.06 at the end of November, down 3.1% on a year-over-year basis. The national office vacancy rose 110 basis points at the end of last month to hit 16.2%.

And tech company struggles are only exacerbating the office market’s woes.

Look at Meta, the company still better known to most as Facebook. Meta has already left four office buildings and is set to give up its presence at two more. And this is happening only since Meta’s third-quarter earnings call.

On the brighter side? CommercialEdge says that several tech companies have stated that their workers won’t be able to work out of the office on a full-time basis. That at least brings hope that the tech sector will remain an important contributor to office demand in the coming years.

Two key markets in the Midwest have at least held steady when it comes to office rents and vacancy rates. In Nashville, the average listing rate for office space in November was $31.20 a square foot, an increase of 2.8% from a year earlier. The office vacancy rate here actually fell 10 basis points from last November to 18%.

In Chicago, the average listing rate for office space rose to $27.89 a square foot at the end of November. That is an increase of 2.7% from the same month a year earlier. The Chicago office market’s vacancy rate stood at 19% at the end of November, up 30 basis points from a year ago.

The sluggish state of the office market hasn’t choked off development completely, though. CommercialEdge reported that 132.3 million square feet of office space was under construction as of the end of October of this year, the equivalent of 2.1% of existing stock.

CommercialEdge also reported $80.4 billion in office transactions through the first 11 months of the year. Dallas recorded more than $4 billion in office sales through the first 11 months of 2023, while Chicago saw more than $3.1 billion.

Austin, Texas, recorded more than $1.9 billion in office sales during this time, while Nashville saw more than $1.3 billion. Minneapolis-St. Paul notched more than $970 million in office sales during the first 11 months of 2022.