Bogged Down by Declining Rent Growth? Offer Managed Wifi with Elauwit
During the COVID-19 pandemic, investors shelled out loads of money to purchase and construct apartment buildings as the housing market was booming. High demand and extremely low interest rates helped to fuel this development, and building owners were rewarded handsomely for their investment.
Finance company MSCI reported that in 2021, investors purchased an astounding $355.5 billion worth of apartments. The next year, that number dropped but was still valued at $299.2 billion.
The previous single-year record for multi-family sales happened in 2019, MSCI said, and that only totaled $194 billion.
All of this investment created an extremely competitive market from a building owners' perspective. Yet, they were able to capitalize due to the fact that rents were increasing at record paces.
Since then, the market has completely shifted, thanks in large part to rising interest rates that have been implemented by the Federal Reserve Bank to combat rising inflation. That has left many of these apartment building owners wondering how they can survive in an environment where soaring rent prices are a thing of the past.
Luckily, MDU property owners still have a way to bring in more money each month. They can increase rent in a way that tenants will be happy to pay, by offering best-in-class internet connectivity.
The Change in Rental Market
As the lockdowns of the pandemic ended in mid-2020, the housing market began to explode. It wasn't just single-family homes that started to rise in value, though; rents went through the roof as well.
In February of 2022, average asking rents went up 16.9% compared to February of 2021. That was the pinnacle of rent growth in the U.S. During periods of growth like that, apartment building owners were certainly reaping the rewards of their investment.
That was relatively short-lived, though, as the significant profitability was reliant on rents rising at significant rates, combined with continued low interest rates. Over the last year-plus, both of those things have changed.
No longer is the federal funds rate near zero. As of the Federal Open Markets Committee's last meeting, that rate has reached a range of 5% to 5.25%.
Rent growth has slowed substantially, too. From March to April of this year, asking rents increased just 0.6%. Compared to the typical month-to-month increases that were seen for the month of April for 2016 through 2019, that was slightly below the 0.7% increase.
Year-over-year, average asking rents are up 5.3%, which is a good sign, but it's slowed enough to make it challenging for MDU building owners. Compared to the typical peak rent from September of 2022, current rent is only up 0.5% year-over-year.
The median asking rent in April was $1,289 for a one-bedroom apartment, which marked the fourth month in a row that it was below $1,300. And average rent prices for April increased just 0.29% over March, which was the smallest annual change since back in March of 2020.
In each of the last five months, annual changes have been below 5%, and below 10% for each month since September of 2022. That's a stark change from October of 2021 to August of 2022, when every month experienced an annual increase of more than 10%, averaging 14.65% in that time.
How Building Owners Can Combat Declining Rent Prices
Many apartment building owners are now left scrambling trying to make up for the declining rent prices as they seek to remain profitable enterprises. It's been a rather difficult period that has dropped on them rather quickly.
With competition in the market so tough, it's challenging for these building owners to simply increase rents, as they risk losing potential tenants to competitors.
Savvy building owners can support rent increases by offering best-in-class internet connectivity. By partnering with Elauwit, a boutique national telecom services company, building owners can boost rents by $25 to $35 per month, significantly increasing their bottom line for not just now but far into the future.
That's because apartment complexes that offer the ubiquitous, always-on and powerful Managed Wifi services that Elauwit does are able to attract and retain tenants at much higher rates than those that do not.
Want to learn more? Contact us today to find out how we can help you boost rents by offering Managed Wifi at a time when many apartment owners are struggling to stay afloat.