COLUMBUS (COLUMBUS BUSINESS FIRST) — Central Ohio suburbs are seeing unprecedented rental growth with high demand for properties, experts say.
Rob Vogt, managing principal at Vogt Strategic Insights, told Business First part of the high demand for rentals stems from a lack of affordable housing as millennials and Generation Z begin to make their way into the market.
“Since we’re not meeting the demand for housing in Central Ohio, and the cost of single-family housing, which as we know has skyrocketed, a lot of these millennials are kind of being stuck in apartments,” Vogt said. “They simply can’t afford a new house or even an existing house for that matter for where they want to live. So to some degree, the economic situation has sort of trapped them in apartments.
“And then you’ve got this whole Generation Z coming behind them, that is also demanding apartments, so it’s almost a perfect storm in terms of the demand for apartments at this point.”
This constant demand is why rent is increasing, Vogt said.
According to data from Reis, effective rents, or rent after any concessions, for all classes of apartment building per unit in Columbus increased almost 18.9% from May 2016 to May 2021.
“You’ve got more people who want apartments, you can raise your rents,” Vogt said. “If somebody doesn’t want to pay the rent that you’re proposing, there’s somebody behind them.”
Still, while suburbs are booming, Vogt said downtown Columbus has more supply than demand for rental properties.
“There’s been some short-term supply issues that have put more units into the market than there is demand and we’ve not seen the rent growth in those areas like we’ve seen in suburban areas,” Vogt said.
Brian Schottenstein, president of Schottenstein Real Estate Group, told Business First he thinks suburban communities got a small boost in population from the pandemic because people did not want to be confined, but that the boost is not a permanent one.
Schottenstein said he believes apartments are doing well because of the wide demographic of potential tenants, ranging from young professionals to empty-nesters looking to downsize.
Schottenstein said his company’s “growth corridor” is in northwest Central Ohio, in areas like Delaware and Union counties as well as Powell and Jerome townships. Prior to its developments, multifamily units were not common in these areas.
“In the suburban Central Ohio markets, I’ve never seen a better time for multifamily,” Schottenstein said at Thursday’s Columbus Commercial Real Estate Summit.
“You’d think with the homebuilding being so hot and interest rates being low like in the mid-2000s, that multifamily would actually lag behind,” Schottenstein said. “But, we’re seeing the total opposite. We can’t build quick enough.”
Schottenstein Real Estate Group currently has three communities under construction: Orange Grand, Liberty Summit and Liberty Grand, Schottenstein told Business First.
Vogt said to lessen the demand of rental properties, builders need to build more houses, but he doesn’t think there’s the capacity to do that. Even though interest rates are low, prices remain high, making it tough for some potential homebuyers to afford a house.
The average price of a home sold in Central Ohio in June 2021 was $316,207, according to a June 2021 market update report from ColumbusRealtors. That was a 15.8% increase from June 2020. The median price in June 2021 was $275,000, a 14.1% increase from the same month of the previous year, according to the same report.
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