Vacancy Rates Rise in Downtowns, Fall in Suburbs

USA Today ran a story about the glut of “glitzy” downtown apartments and a dearth of new, less expensive suburban apartments in metro areas around the country. From the article:

Since 2012, the nation’s supply of apartments has swelled 16.6% in central business districts and 13.5% in “secondary core” areas surrounding the downtowns, but just 5.5% for mid-priced suburban units, according to real estate research firm CoStar…

Over the past four years, the vacancy rate in downtowns and adjacent districts has climbed from 3.4% to about 5.5%, CoStar figures show…

“These new flashy, splashy downtown buildings — they have a vacancy problem,” Nordby says. “They are too expensive to rent” and there are too many of them. At the same time, he says, “There’s not much supply of new apartments in the suburbs.”

As a result, since 2012, average rents have risen 12.3% in downtowns and 18% for mid-level suburban apartments, CoStar says.

The city-suburb split is playing out in metro areas across the country but it’s particularly acute in large cities such as Los Angeles, Washington and Chicago. In Los Angeles, about 5,500 apartments have opened downtown the past 3 ½ years, with typical rents of about $6,500 a month, and the district’s overall vacancy rate has climbed from 4.5% to 9.9%, according to CoStar data.

Here in the Triad two of the hottest development areas have been the downtown cores of Greensboro and Winston-Salem, but to date the “city/suburban” split hasn’t been as pronounced. And of course we haven’t seen anyone who can pull $6,500 a month in rent either.