Flat homeownership levels and general economic growth will drive apartment rentals.
New York, NY (PRWEB) May 17, 2014
The Apartment Rental industry has rebounded from the recession to set new revenue highs in 2014. Even though industry growth was tempered by the recession, the subprime mortgage crisis pushed people out of homeownership and into renting. Increasing demand, combined with a shortage of available rental units due to industry pullback during the economic downturn, decreased rental vacancy rates and allowed landlords to raise rents. Therefore, IBISWorld expects industry revenue to climb at an annualized rate in the five years to 2014, with a bump in 2014.
Initially, rising unemployment and decreasing incomes caused by the economic downturn forced many people to move back in with their families or look for cheaper apartments, which decreased demand for apartments and slowed revenue growth. This caused strain on the many operators that found themselves overleveraged from boom-time expansion. Subsequently, according to IBISWorld Industry Analyst Maksim Soshkin, “companies laid off workers, cut down capacity, stopped development projects and, in some cases, exited the industry.” However, “the same economic factors that caused damage to the industry also forced people out of homeownership,” says Soshkin. Lack of work and declining wages made it unaffordable for many to keep their homes or buy new ones, causing homeownership to fall and renting to increase. The rise in demand and reduction in supply drove the rental vacancy rate down in 2014, allowing landlords to increase rents and profit margins. Therefore, by 2014, industry revenue surpassed its prerecession peak.
The Apartment Rental industry is mainly composed of small, independent lessors, with the top four companies accounting for a tiny proportion of industry revenue in 2014. Over the five years to 2019, industry revenue is forecast to rise an annualized rate. As the economy improves, the unemployment rate will drop and incomes will rise, enabling people to afford renting and paying higher rates. In addition, an ever-increasing number of young adults, the age group most likely to rent, will enter the labor force. This demographic will stay single longer and prefer to live in cities. Consequently, without their own family, many of them will hold off on buying a home. However, improving economic conditions will help others buy a home, thereby sapping demand for apartments. Yet, stringent mortgage lending and increasing interest rates will subdue this threat. Furthermore, since most of the future industry growth will take place in urban areas where homeownership is expensive and low, many participants will be insulated from housing market competition.
For more information, visit IBISWorld’s Apartment Rental in the US industry report page.
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IBISWorld industry Report Key Topics
Operators in the Apartment Rental industry act as lessors of buildings that are used as residences or dwellings. Industry participants are owner-lessors of residential buildings and establishments that rent real estate and then act as lessors by subleasing it to others. In addition to apartment rentals, the industry also includes single-family homes and town houses.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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