Living in an apartment? Expect your rent to go up again.
Renting has gotten increasingly expensive over the last five years. The average U.S. rent has climbed 14 percent to $1,124 since 2010, according to commercial property tracker Reis Inc. (Nasdaq: REIS).
That’s four percentage points faster than inflation, and more than double the rise in U.S. home prices over the same period.
Now, despite a surge in apartment construction, rents are projected to rise yet another 3.3 percent this year, to an average $1,161, according to Reis.
While that’s slower than last year’s 3.6 percent increase, the broader upward trend isn’t going away.
“The only relief in sight is rents in the hottest markets are going to go up at a slower pace, but they’re still going to go up,” says Hessam Nadji, chief strategy officer at Marcus & Millichap, a commercial real estate services firm.
The main reason: More people than ever are apartment hunting.
Young people who have been living with their parents are increasingly finding jobs and moving out.
Rising home prices are leading many long-time renters to stay put.
In addition, most of the new apartments coming on the market are aimed at affluent tenants and carry higher-than-average rents. That’s especially true in cities where new buildings are going up in urban core areas, which means builders need to recoup higher land and development costs.
Consider Denver, where rents have increased more than 5 percent a year since 2010 ó 9.2 percent in 2014 — according to Marcus & Millichap.
Of the 9,400 new apartment units added last year, 23 percent were in urban core areas.
Competition for apartments means renters are less likely to be able to negotiate with landlords, or win concessions such as a free month’s rent.