The net rent at Class A buildings averaged $2.40 per square foot, down 1.2 percent from the second quarter but up 8.1 percent from 2010, according to a report from Appraisal Research Counselors.
In addition, the average downtown Class A occupancy rate dropped to 95.1 percent from 95.6 percent in the second quarter.
Figures like these have the potential to cause alarm in an era where renting has largely superseded buying. These days, higher rents generally have not deterred tenants from choosing apartments over homes, and the increased demand has prompted numerous new rental developments.
“The market has backed off a little bit, and it’s more from a decline in traffic than anything,” said Tony Rossi, an apartment developer and president of RMK Management Corp.
Rossi isn’t worried, however, because he attributes part of the plunge to seasonal causes and observes that the supply of new apartments isn’t expected to grow until after 2012. The upcoming year, on the other hand, might see an apartment shortage and even more rent elevation, Appraisal Research predicted.
“A lot of the movement that was taking place to rental has slowed down, but it’s still positive, and we expect that it’s going to stay positive for the next couple years,” said Appraisal Research vice president Ron DeVries.
Yet about 3,000 new downtown apartments are expected to launch in 2013, and more than 5,600 could be added to the downtown market over the next few years.
“2013 is going to be a big year for deliveries, and the market’s going to be softer then,” DeVries said.
Then again, the rent and occupancy rate at less-expensive Class B apartments increased in the third quarter, according to the report. The net rent climbed to $2.10 per square foot, up 1.5 percent from the spring. At 95.1 percent, the occupancy rate was a 1.1 percent increase from the second quarter.
However, “landlords rented out just 130 more apartments in the third quarter after renting 809 in the second quarter and 480 in the first,” according to Crain’s.