American Cities with Largest Rent Drops

You can now live like a King for much Less:

The economic crisis has opened up opportunities for apartment tenants. The inventory of vacant apartments is expanding, and rents are dropping quickly in major metros across the country.

For renters with leases about to expire, it's time to negotiate. Landlords are working extra hard these days to keep units filled.

Of course, your ability to hold on to an apartment—especially a luxury unit—depends on how secure you feel about your own job. Americans lost about 2.6 million jobs in 2008 (mostly in the final quarter of the year) and are likely to lose millions more this year. They are losing money on stocks and other investments and are cutting back on costs by downsizing and moving in with family members or roommates as they hunker down for a deep recession.

Landlords, as a result, are forced to offer discounts to fill vacancies. Apartment vacancies spiked in September after the collapse of Lehman Brothers and the eruption of the financial crisis.

Go for a Long Lease

"If you've got job, it's a great time to be a renter and to sign the longest lease possible," said Ron Johnsey, president of Axiometrics.com, a Dallas apartment data company.

BusinessWeek.com worked with Axiometrics to come up with a list of 25 large metros where rent declines accelerated most at the end of 2008. In Salt Lake City, where the economy had been holding up better than most cities, effective rents (including landlord concessions) fell 2.3% in the fourth quarter compared with the previous quarter. By comparison, rents were climbing 3.3% in the fourth quarter of 2007.

The New York metro area, including New York City and its New York and northern New Jersey suburbs, saw a 3.7% drop-off in effective rents in the fourth quarter (compared with a 0.5% increase in the fourth quarter of 2007), according to Axiometrics, which surveys landlords across the nation once a month.

The situation has changed dramatically in the expensive Manhattan market, where tenants are suddenly in control. The layoffs on Wall Street have forced landlords to cut rents; offer one, two, or even three months' free rent; and pay the broker fee that the tenant would otherwise pay (often 12% of the annual rent).

Luxury High-Rises Hard Hit

Vacancies are rising most in the high-end doorman buildings, particularly in the Financial District, said Daniel Baum, chief operating officer for the Real Estate Group NY, a residential sales and rental brokerage firm. But rents are falling all across Manhattan, in all price categories, he said. Some landlords have dropped rents as much as 20% to lure tenants, he said.

"The luxury high-rise market, especially new construction, is the one taking the worst hit," Baum said. "There's a building offering three months' free rent in the Financial District."

Victor Calanog, chief economist for apartment research firm Reis said landlords nationwide are more motivated to cut rents than they were after the previous recession at the beginning of this decade. Landlords now are under pressure to keep tenants because vacancies are higher than they were in 2000 and so are the debt payments they need to cover. Too many vacancies, and some landlords are likely to face foreclosure, he said.

"I've never seen this kind of acceleration in decline," Calanog said. "It's somewhat sobering."

Metros With the Biggest Rent Drops

Salt Lake City

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Rank: 1
Rent drop: -5.7%
Q4 2008 rent change: -2.3%
Q4 2007 rent change: 3.3%
Effective rent: $810.30

Salt Lake City, Utah's capital and seat of the Church of Jesus Christ of Latter-Day Saints, saw a large slide in apartment rents during the fourth quarter. The slowing real estate market has hurt the job market in construction and housing, though employment remains relatively tight. The unemployment rate climbed to 3.4% in November 2008 compared to 2.6% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 3.1% in the same period in 2007. Landlords on average are giving 2.2-week rent concessions.

Nassau-Suffolk (Long Island, N.Y.)

Rank: 2
Rent drop: -4.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 1.5%
Effective rent: $1,786.60

Apartment rents in Long Island's suburban counties have dropped as Wall Street layoffs and tumbling home prices have taken a toll on the economy. The unemployment rate climbed to 5.2% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate fell to 3.1% in the fourth quarter last year from 4.3% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.

Raleigh-Cary, N.C.

Rank: 3
Rent drop: -4.0%
Q4 2008 rent change: -4.4%
Q4 2007 rent change: -0.4%
Effective rent: $752.70

Raleigh, the state capital and home of North Carolina State University, has been somewhat buffered from the recession until recently, in part because of its university, health-care, and government jobs. But apartment rents are falling as problems in the larger economy take their toll. The unemployment rate in the Raleigh-Cary metro area climbed to 6.1% in November 2008 compared to 3.5% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 5.3% in the same period in 2007. Landlords on average are giving 3.1-week rent concessions.

New York-Wayne-White Plains, N.Y./N.J.

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Rank: 4
Rent drop: -3.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 0.5%
Effective rent: $2,672.20

The New York-Wayne-White Plains metro area is a vast area that includes New York City and the suburbs of northern New Jersey and Westchester County. Rents, along with home prices, had been growing in Manhattan until the financial crisis took hold in mid-September. Since then, rents have dropped as landlords adjust to the new reality. Major layoffs at financial firms and in other sectors have forced tenants to give up expensive apartments and move in with parents or roommates. The unemployment rate climbed to 6% in November 2008 compared to 4.6% in November 2007. The apartment vacancy rate jumped to 4% in the fourth quarter last year from 3.4% in the same period in 2007. Landlords on average are giving rent concessions of 1.1 weeks.

Seattle-Bellevue-Everett, Wash.

Rank: 5
Rent drop: -3.5%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.3%
Effective rent: $1,161.60

Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.

Portland-Vancouver-Beaverton, Ore./Wash.

Rank: 6
Rent drop: -3.2%
Q4 2008 rent change: -2.8%
Q4 2007 rent change: 0.4%
Effective rent: $850.40


The Portland area, known for its environmental consciousness, microbrew beer, and cultural offerings, has seen manufacturing layoffs spike in the last several months. The unemployment rate climbed to 7.2% in November 2008 compared to 4.7% in November 2007. The apartment vacancy rate jumped to 5.8% in the fourth quarter last year from 4.6% in the same period in 2007. Landlords on average are giving rent concessions of two weeks.

San Jose-Sunnyvale-Santa Clara, Calif.

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Rank: 7
Rent drop: -3.0%
Q4 2008 rent change: -3.0%
Q4 2007 rent change: 0.0%
Effective rent: $1,788

Silicon Valley, the nation's technology capital, is suffering from layoffs and dimming economic prospects as the recession deepens. The unemployment rate in the San Jose metro area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.2% in the fourth quarter last year from 3.5% in the same period in 2007. Landlords on average are giving rent concessions of one week.

Charlotte-Gastonia-Concord, N.C.

Rank: 8
Rent drop: -2.9%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.9%
Effective rent: $736.40

The recession struck the Charlotte area later than it did much of the country, but the banking center is now getting hit. Layoffs are accelerating in and around Charlotte, home of Wachovia and Bank of America. The unemployment rate jumped to 8.1% in November 2008 compared to 4.8% in November 2007. The apartment vacancy rate jumped to 8.5% in the fourth quarter last year from 6.3% in the same period in 2007. Landlords on average are giving 3.1 weeks of rent concessions.

Oakland-Fremont-Hayward, Calif.

Rank: 9
Rent drop: -2.9%
Q4 2008 rent change: -2.1%
Q4 2007 rent change: 0.8%
Effective rent: $1,515.40

In the Oakland area, located across the bay from San Francisco, economic troubles have only gotten worse with the financial crisis. But it has also seen a rising tide of foreclosures. The unemployment rate in the area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.6% in the fourth quarter last year from 3.9% in the same period in 2007. Landlords on average are giving 1.4 weeks of rent concessions.

Boston-Cambridge-Quincy, Mass.

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Rank: 10
Rent drop: -2.8%
Q4 2008 rent change: -2.4%
Q4 2007 rent change: 0.5%
Effective rent: $1,634.20

The Boston area, home of Harvard University, MIT, and Boston University as well as some of the nation's finest hospitals, is seeing damage to its financial sector. Thousands of financial-services layoffs have been announced, including major cuts at Boston-based State Street and Fidelity investments. The unemployment rate climbed to 5.0% in November 2008 compared to 3.6% in November 2007. The apartment vacancy rate jumped to 6.0% in the fourth quarter last year from 4.7% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.