An Overview of the Current Rental Market
Hello, I'm Mike Lautensack from Del Val Property Management. As we approach the end of the year, it's crucial to examine the trends in the rental market, their implications, and what we can anticipate for 2024 and beyond. Currently, the national average rent stands at approximately $2,000, with Philadelphia slightly lower at around $1,800. Both have seen moderate increases over the past year, with national rents up by 3.2% and Philadelphia by 3.8%. However, the more dramatic change is observed over the past four years, with a 31% increase nationally and 24% in Philadelphia, largely influenced by the pandemic.
A Six-Year Perspective on Rental Trends
Tracing back to 2017, rental rates were increasing at a steady, modest pace until the pandemic hit, causing a significant spike in rents and market distortions. However, the last 12 to 18 months have shown signs of stabilization.
Key Drivers: Supply and Demand
Supply Side Analysis
- Shortage of Supply: The past decade has seen a chronic shortage in the supply of apartments, both nationally and in Philadelphia.
- Short-term Rentals: A notable trend has been the conversion of long-term rentals to short-term options like Airbnbs. This trend is expected to reverse, potentially increasing long-term rental availability.
- Construction Trends: Builders have struggled to keep pace with demand, but recent developments indicate a catch-up, which should help alleviate some supply constraints.
- Office Space Conversion: With changing work dynamics, we anticipate a significant conversion of office spaces into apartments, further easing supply issues.
Demand Side Dynamics
- Population Growth: With a 1% annual population growth, the demand for rental apartments is increasing.
- Affordability Issues: High property prices are forcing more people to opt for rentals, increasing demand.
- Lifestyle Changes: Post-pandemic, there's a growing preference for living alone, further fueling rental demand.
Impact on Rental Vacancy and Pricing
Since 2008, we've observed a dramatic drop in apartment availability, pushing the average vacancy rate down to nearly 6%. This supply-demand imbalance has led to a significant increase in rental prices.
Future Projections and Strategies
Rental Market Forecast
- National Trends: We project a 2-3% increase in rents nationally, slightly below the long-term trend.
- Philadelphia Market: A higher increase of 3-4% is anticipated due to ongoing challenges in meeting demand and supply.
Del Val's Approach to Rent Increases
Given the historical lag in rent adjustments over the past four years, Del Val aims to recommend a 5-7% increase in rents upon lease renewals. This strategy is intended to gradually align rental rates with market realities.
Final Thoughts and Contact Information
As we navigate these changing dynamics, Del Val remains committed to providing expert guidance and strategies to maximize your rental investments. For further discussion or queries, feel free to leave a comment below or contact me directly via email.