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  • Writer's pictureRealFacts Editorial Team

Rent Cuts Particularly Acute for Class B and C Apartments


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In the ever-evolving landscape of the real estate market, the latest reports indicate a notable trend: Class B and C apartments are experiencing significant rent cuts, particularly in fast-growing submarkets.


According to a recent report from RealPage, these price declines are most pronounced in areas where there has been a substantial influx of new apartment supply. Analyst Kim O'Brien highlights that while it's expected that the most competition from new supply would affect Class A properties, it's Class B (-3.2%) and C products (-4.7%) that are seeing the steepest declines.


In contrast, submarkets with minimal new supply, less than 1% of existing stock, are witnessing notable rent growth for Class A properties, reaching 2.6%. This indicates a stark difference in market dynamics depending on the level of new supply.


Nationally, according to Yardi Matrix, rents have increased for the second consecutive month in April, nearing peak levels. However, Jeff Holzmann, Chief Operating Officer at RREAF Holdings, emphasizes that rent prices, like any economic variable, are set by supply and demand. He notes a shift in focus towards renovating and upgrading Class B and C properties, which has increased the supply of this product and subsequently led to more competition and pressure to maintain occupancy rates.


Jeff Brown, Founder and CEO of T2 Capital Management, acknowledges the unprecedented supply of new multifamily units scheduled for delivery in 2024, but he remains confident that rent reductions for high-quality, well-located products won't persist due to elevated demand.

However, the story isn't uniform across all markets. Patrick Hudson, Associate at Endura Advisory Group/CORFAC International, points out that while there have been minimal fluctuations in certain markets, overall, the rental market for Class B and C apartments remains resilient due to increased demand for affordable housing and limited new construction in this segment.


Jay Lybik, National Director of Multifamily Analytics at CoStar Group, highlights a significant rent deceleration in Class A properties since rent growth peaked in early 2022. This deceleration is primarily due to the high influx of new supply in this market segment.


Luis Raúl Solá, COO & CFO at Kingbird Investment Management, shares insights from his Class B portfolio, showing year-over-year rent growth between 3% and 6% in various markets. However, he notes that this growth is higher in markets with strong supply and demand fundamentals, where new Class A supply doesn't directly compete with their assets.

Rodney Ballinger, Vice President of Multi-Family Investments at TRI Commercial/CORFAC International, emphasizes the impact of high interest rates on homebuyers, keeping them on the sidelines as renters. This has led to increased concessions for Class A properties while Class B and C properties see flat or declining rents.


As the real estate market continues to evolve, these insights shed light on the complex interplay between supply, demand, and market dynamics, influencing rent trends across various property classes and markets.

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