by Neil Gonzales, Wolf Street:
SF Apartments Offer Move-in Incentives as Tenant Demand Slows
Offering rental incentives is not uncommon in the apartment industry generally. But it is if it’s happening in San Francisco.
“It’s a relatively recent phenomenon,” said Patrick Carlisle, chief market analyst for the San Francisco-based Paragon Real Estate Group. “It is unusual” given that the city’s apartment market has seen “frenzied demand” over the last few years.
But as that demand—though still strong—has eased up partly because of a hiring slowdown; apartments have started to offer incentives to prospective tenants such as a rent-free month.
The newer, particularly bigger complexes primarily are the ones giving concessions rather than the older apartments, and this trend is expected to continue as deliveries add to the market’s inventory.
Almost 8,000 market-rate units are currently under construction in the city, according to Katerina Cheok, San Francisco market analyst for online rental-listing company Apartments.com. “So these concessions are likely to continue as these apartments” are delivered and seek to have their units occupied as quickly as possible, she said.
The incentives are also a way for new apartments to stay competitive. “They are competing for the same renters for these brand-new units,” Cheok said.
In contrast, older properties already have established tenants—who tend to remain put, she said.
Among the newest apartment communities with an incentive offer is the 162-unit Civic at 101 Polk St. The Civic, which is about 60 percent leased, is giving new tenants one month free of rent if they move in now.
The 273-unit Azure at 690 Long Bridge Street has a similar offer on select units, Cheok said. The Azure, which opened a year ago and is now 95 percent occupied, “is just trying to lease up its larger units.”
The 27-unit building at 280 Brighton Ave., which just opened and is about 20 percent pre-leased, is offering the first month free on all its apartments, she said.
The 320-unit Jasper at 45 Lansing St. opened late last year and had been offering one month free on certain units up until recently, she said. The Jasper discontinued the concession once it hit 90 percent occupancy.
“Every building in the city is offering some sort of concession,” said a staff member from one of the buildings, who did not want to be identified. “It’s just the market. It’s to stay competitive. You fall behind if you don’t have a concession.”
But the concession-giving is also tied to a pullback in the pace of hiring that started last fall, Carlisle said.
According to his analysis of state employment numbers, San Francisco saw the number of employed residents go down by 900 between December 2015 and April 2016 compared to it being up 4,000 the previous year and up 5,700 two years ago for the same timeframe. Overall, the city was home to 535,500 working people as of April.
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