Apartment Premiums Dip Near San Francisco Mass Transit Hubs
Traditionally, apartment tenants have been willing to pay more to live near mass transit hubs in urban rental markets. But several new factors are altering the behavior of apartment dwellers and lowering the rent premiums of on-transit commercial multifamily real estate, reports National Real Estate Investor.
On-transit apartment premiums down 25 percent
A new study from MetLife Investment Management has found that ride-sharing transportation, on-demand bike and car rentals, electric vehicles, and other factors are leading to a decrease in the premium on-transit apartments. These are defined as dwellings within a five-minute walk of a subway stop or light rail station in the San Francisco market. The premium renters paid for on-transit rental units has declined from a historical average of 20 percent over similar units located further from a transit hub to only 15 percent, a slump of 25 percent.
Price drop centered on home of ride-sharing services
“So far the effect has only occurred in a meaningful fashion in San Francisco,” Will Pattison, associate director of real estate for MetLife Investment Management, told the news outlet. The decline has been seen since companies like Uber and Lyft began offering services in San Francisco. Pattison noted, “[t]he same dynamic is likely to occur in markets like Chicago and Boston over the next several years.”
Increasing apartment inventory could be a factor
Yet not everyone was convinced ride-sharing services were the cause of shrinking premiums. “Given we’re now adding significant inventory in many neighborhoods with established transit options, rent premiums for transit-oriented developments are not necessarily at the levels seen historically,” noted Greg Willett, chief economist for RealPage Inc., a research firm. “We have to get through the wave of projects in lease-up to see whether or not there’s a meaningful reset of pricing relationships at individual properties across these submarkets,” he argued.
Future apartment projects should include curbside access
“The greater availability and declining cost of ride sharing and ride-hailing services will make it even easier to forgo car ownership in the future,” Pattison said, noting that results of the research could help developers and designers create the apartment complex of the future. “The most immediate impact on apartment communities is that projects need appropriate passenger pick-up and drop-off points and wait areas.”