New York Concessions are Highest in Nation and Rising

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Multifamily Listings Increase Despite Interest in Off-Market Sales

New York currently has the highest concessions in the country: According to Fannie Mae, the value of the concessions on offer increased by 5.1 percentage points from 7.5% at the end of 2019 to 12.6% in August 2020. One month of free rent corresponds to a concession rate of 8.3%. This is not the only reason why this increase is significant are multi-family concessions in general, but new research from Fannie Mae shows that they are rising fastest in the top US markets as well as in top class A properties.

Other top markets are San Francisco, where the concessions are behind New York with 11.3%, while Boston follows with 9.6%. Modest priced markets such as Orlando and Phoenix saw lower concessions rise and relatively low concessions overall compared to last year. The concessions in Orlando increased from 5.3% to 6.6% and in Phoenix from 4.9% to 6.4%.

Fannie Mae notes that these markets also saw the majority of new home deliveries this year. In 2020, 450,000 new residential units came onto the market, but most of these units have been concentrated on 12 subways. Here, too, New York leads with more than 71,600 units, followed by Washington, DC, Los Angeles, Houston and Dallas. Austin, Seattle, and Boston follow with slightly fewer units, and Orlando, Atlanta, Phoenix, and Miami complete the list in the top 12.

In addition, luxury apartments were the most common asset class for new builds. At the end of 2019, the concessions for class A apartments were 7.2% and by August 2020 they had risen to 9.2%. This market segment also recorded the most new construction activities. This year, 246,000 units have already been completed, and a further 204,000 are to be completed this year. As a result, the Class A concessions should continue to increase.

In the asset classes of classes B and C, the concessions have also increased, but not to the same extent as for apartments in class A. These apartments are also usually part of the older building stock, not new buildings. Class B concessions rose from 5.5% in 2019 to 7.2% in August 2020. Class C apartments, on the other hand, rose from 5.6% at the end of 2019 to 6.8% in August 2020. The increase the concessions began in April 2020 after the start of the pandemic.

However, the rising concessions in Class A housing could be an indicator of the rest of the market. As Class A concessions increase, it will put pressure on Class B and C assets to do the same. As a result, Fannie Mae expects concessions to rise across all asset classes in markets with high home delivery rates. The report also assumes that the demand for apartments will increase over the next 12 months as the employment increases over the course of the market.

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