This past June, the U.S economy lost another 467,000 jobs causing the unemployment rate to hit an unprecedented 9.5%. With approximately 5.7 unemployed workers for every job opening and unemployment expected to rise to 10%, one market that has been hit significantly is the rental market.
According to Reis, an independent research firm that provides commercial real estate information to lenders, institutional investors, and hedge funds, the vacancy rate for U.S. apartments is at its highest in 22 years. In a report released on Wednesday, Reis reported that this past quarter, the national vacancy rate rose to 7.5 percent, an increase of 1.4 percent from 2008. The record high was 7.8 percent in 1986. Axiometrics, a research firm that measures the performance and apartment markets and REITs concurred that, it is one of the worst second-quarter performances they’ve seen.
The unprecedented increase in rent vacancies benefits renters in two ways. It forces landlords to lower rent and often spurs renters to become home owners.The most significant reductions thus far have been in regions where job loss has been most significant and areas where a large percent of homes and condominiums have been foreclosed and turned into rental properties. The five largest effective-rent declines over the past 12 months are New York with a -5.8% decline in average monthly rent, followed by San Jose, San Francisco, San Bernardino / Riverside and Miami.
The rental market in the commercial real estate has also been greatly affected by the economic downturn. According to Real Capital Analytics, a New York-based commercial real estate analysis company, more than $31 billion in property is considered distressed. But as many stores are being forced to close their doors, their peers are findingways to use this to their advantage. Retail chain stores are saving millions simply through re-reading lease contracts; specifically the Co-Tenant/ Co-Tenancy Clause- a clause in shopping center leases that provide for certain rights in the event any named co-tenant closes its store. Chico’s has reportedly saved $8.1 million so far by studying the cotenants named in the leases of each store and investigating the malls where its +1,000 stores are occupied to search for violations. Charming Shoppes Inc, believes that it will save somewhere around $10 million through rent relief.