Free Rent? Monthly Concessions Drying Up in DC Area

• July 14, 2010
• 3 Comments

by Ryan Holeywell

Renters in the DC area whose leases are set to expire this summer could be in for a surprise once they start apartment hunting. Monster promotions that were all the rage at new projects a year ago are getting harder and harder to find.

A new report from real estate research firm Delta Associates finds that those freebies – known formally in the industry as concessions – are drying up after several years of growth. Across the DC region, concessions offered by landlords have been reduced by a third over the last year.

And while half of new projects were offering the equivalent of two to three months free rent in the first quarter of the year, that number has already declined to less than a third.

Jefferson at Capitol Yards

In October, UrbanTurf reported that Jefferson at Capitol Yards was offering three months of free rent with a 13-month lease. That has been reduced to two months. And The Allegro in Columbia Heights, which once offered two months free rent, has cut that deal to a single month.

The situation is so tight for renters that Rick Gersten, founder of apartment finder Urban Igloo, could not name any major complexes in the area offering the three or four months of free rent, which was not uncommon just a year ago. Now, Gersten says, “some do one month free rent,” with top-notch apartments offering the fewest promotions because they can fill up on their own.

Laurel Howell, vice president of internet marketing at Kettler, agrees. She told UrbanTurf that a year ago it was standard to see two months free rent offered at buildings trying to fill up, and three months was typical at properties in competitive areas. Now, Howell said, only a handful of Kettler properties offer any concessions at all. When The Millennium at Metropolitan Park in Pentagon City started leasing in late 2009, it offered the standard two months free rent; but with so much demand, that offer has been cut in half, and is now limited to only certain types of units.

Gersten characterized the situation as a natural leveling out.

“Extreme concessions have now been replaced with more moderate concessions,” Gersten said. “The days of the extreme concessions are over.”

The reasons for the decrease in free rent promotions aren’t complex. A strong job market in the DC area, a transient work force, and a housing crisis that caused people to shift from owning homes to renting has led to an increase in rental demand. The Washington-area vacancy rate for investment-grade apartments has dipped by a quarter over the last year to 3.1 percent—the lowest in the nation.

Courtyard at Allegro Apartments

In 2008 and 2009, an influx of rental buildings opened and tenants benefited as developers competed for their business. But now things are shifting in favor of the rental projects as demand rises, widespread rental shortages are projected through early 2012, and rents continue to increase, up 3.5 percent over the last year in investment-grade apartments in the area.

“As the market and demand stays strong, and there’s less product to lease, who’s is in the driver seat is starting to change,” said Grant Montgomery, a vice president at Delta Associates. “With less units available, but still solid demand, there’s more competition for each unit, so the owner has to do less to entice them.”

Montgomery said that the best place for renters seeking free-rent promotions will be areas where there is an influx of new buildings. Delta’s report lists strong concessions in mid- and high-rise buildings located in South Arlington, Alexandria, North Bethesda/Rockville, Silver Spring and Capitol East (includes parts of Southwest, Navy Yard, and Capitol Hill). The Ashton at Judiciary Square, a high-end apartment project near Penn Quarter, is still offering the same incentives that it was back in 2009: two months free rent, which can be taken up front or prorated throughout a 12-month lease. Howell, of Kettler, said her company is only offering large concessions in the suburbs.

Rick Gersten encouraged renters to be flexible when it comes to their location, and to consider bus routes when selecting a residence because it will open them up neighborhoods that aren’t easily accessible by Metro such as Glover Park, Georgetown and H Street Northeast.

“If they’re flexible in their location, they will in turn be able to find what they want in quality and price,” he said.

Gersten added that renters of high-end apartments (rent in excess of $3,500 a month) can still get major price breaks.

Regardless, if you are interested in renting in a new project and want to take advantage of the remaining free rent concessions, you should act fast. Montgomery said that the “window is going to be closing” on the few concessions that remain, since the majority of new rental products won’t deliver until early next year.

Ryan Holeywell is a Washington, DC-based journalist whose work has appeared in USA Today, The Detroit Free Press and washingtonpost.com. He can be reached at .(JavaScript must be enabled to view this email address).

This article originally published at http://dc.urbanturf.com/articles/blog/free_rent_monthly_concessions_drying_up_in_dc_area/2264

3 Comments

1. Rayful Edmond said at 3:55 pm on Wednesday July 14, 2010:

   Loree Grand is now offering 3 months free.

1. Rent Increase said at 4:03 pm on Wednesday July 14, 2010:

   I am nearing the end of my lease at the allegro. Is all they’re currently offering one month free? I got three months when i signed up when they opened.

1. to Rent Increase said at 8:59 am on Thursday July 15, 2010:

   That question is more appropriate for the leasing agent at Allegro.

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