Those with commercial property investments may be seeing an increase in profits. According to an MPF Research survey on the 100 largest U.S. metropolitan markets, effective rents for new leases rose 3.3 percent on average from 2013 to the first quarter of 2014. Rent prices are also slowly climbing due to a decreased rental inventory, consumer credit scores and the job market.
The study showed that in just the first quarter of this year, effective rents for new leases have risen around 1 percent, and this pace is expected to continue even though there was some leveling off due to the harsh winter weather that kept consumers from house hunting. The vice president of research for MPF Research said that although rental demand is not huge, it is “healthy and substantial” due to the creation of more jobs and more young adults moving out of their parents homes.
Detroit was one of the cities that showed a rise in annual rent, coming in with an almost 4 percent growth in the survey. One expert from a real estate appraisal and consulting firm also attributed the rise in rent prices to consumer credit conditions. Renters with poor credit are finding themselves stuck in rental housing because they do not qualify for mortgages. Even those who do qualify may have a hard time finding a starter home because current home owners may face credit problems of their own or not have enough equity in their current homes to be able to move.
For those with commercial property, this means that landlords may have more options when it comes to choosing from possible tenants and may be able to start increasing rent prices. It is important, however, that any increase in the rent is done in accordance with the terms of the existing lease on the property and that new tenants are fully vetted, including checking references, to avoid future landlord-tenant disputes.
Source: MNI, “Reality Check: US Home Rental Prices Rising – Property Managers” Claudia Hirsch, Apr. 11, 2014