Concessions on the Rise for Portland Apartments
CoStar Market Insights: Strong Supply Influx Compels Communities to Offer Renters Concessions
Couch9, a 136-unit apartment complex in downtown Portland.
Though Portland’s economy is strong and many new residents continue moving into the area, lease-up for new luxury apartment buildings is becoming a bit challenging, causing communities to offer renters increasingly sizable concessions.
Since the beginning of the cycle in January 2010, market-rate apartment inventory in Portland has increased by 17.5 percent -- about 27,700 new units have delivered. CoStar anticipates more than 5,700 market-rate apartment units will deliver in 2018, adding to this wave of supply.
While Portland has experienced strong in-migration during this time (25,000 new residents moved to Portland in 2017 alone) vacancy has expanded over the past four years. Also, rent growth has slowed -- another indication of demand pressures facing apartment communities.
From annual rent growth at 10 percent in the halcyon days of 2015, rent growth is currently closer to 2 percent. The situation is getting a little tougher for leasing offices at expensive new apartment buildings; thus, apartment concessions are on the rise.
According to CoStar data, concessions here have consistently increased every quarter from the end of 2015 through the beginning of 2018. Among surveyed rent observations, as of the first quarter of 2018, some type of rent special (anything from free rent to waived move-in or amenity fees) is offered 25 percent of the time. Eleven percent offer at least one month of free rent and 4 percent offer more than one month of free rent.
Unsurprisingly, 4- and 5-Star communities are most likely to offer some type of rent concession. But across the board, all types of concessions have steadily increased.
As two examples of apartment communities offering notably high concessions, Couch9 currently offers eight weeks of free rent and Sky3 Place is offering four weeks of free rent plus a $1,500 gift card. Both 4-Star rated communities delivered in 2017 and are within a 15-minute walk of one another in downtown Portland.
Downtown Portland’s average asking rent is about $1,780 per unit, rising to $1,960 per unit for 4- and 5-Star units. The typical rent at these two communities is much higher: $2,367 per unit at Couch9 and $2,378 per unit at Skye3 Place. The 136-unit Couch9 delivered in August 2017 and is presently 72 percent occupied, while the 196-unit Sky3 Place delivered in May 2017 and is 68 percent occupied.
CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.
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