Got $40,000? In many parts of the country, that amounts to a year of mortgage payments. In Los Angeles it’ll buy you a month in a Hollywood Hills mansion perched above the Sunset Strip--the priciest rental in town.
Across the country in Miami Beach, John Greer of Unusual Villa & Island Rentals will charge you $300,000--enough to buy a house free and clear in most markets--for a month on Palm Island, a resort just south of South Beach. The villa comes with six bedrooms, five baths, a full gymnasium, movie theater, regulation beach volleyball court, heated pool and a dock sizable enough to host a 100-foot yacht.
For the second consecutive year, Forbes.com ranked the most expensive house and apartment rentals in the ten largest U.S. markets. From New York to Las Vegas to San Francisco those willing to drop tens of thousands a month on temporary housing will find luxury apartments offering sweeping park views, roomy poker players’ pads and airy lofts above art museums.
In Pictures: Most Expensive U.S. Rentals 2007
The rental market’s highest tier varies in price from place to place. In Atlanta, $6,500 a month will land you the priciest apartment in town, a two-bedroom, two-bathroom Buckhead condo with floor-to-ceiling windows. While this isn’t exactly cheap, it’s less than 10% of what you would pay in Manhattan--$70,000 a month for a penthouse in the Trump International Building. It boasts 187 feet of 10-foot windows and a 270-degree view that includes the George Washington Bridge, Hudson River and all of Central Park.
Tenants’ lists at such places tend to be a who’s who of A-list celebrities, athletes, business people and politicians. This client base often needs to relocate at the drop of a hat. Whether due to filming schedules, sports trades, corporate relocations, or testy voters, such tenants want the luxury they’re accustomed to without the commitment of buying.
“The people who rent these properties are wealthy and, well… wealthy,” says Greer, whose rental properties around the world have hosted high rollers like Sean Connery, Oprah Winfrey and former president George H. W. Bush. All have been priced in the hundreds of thousands per month.
At these prices renters can expect views, prime locations, 24-hour concierge and maid service, fitness centers, spas and privacy.
But even though money may not be a deterrent, for stars and suits renting a temporary home for tens-of-thousands of dollars can be cost effective given what they’d pay for a similar level of luxury in a hotel. To stay in a 1,350-square-foot luxury suite at the Washington D.C. Ritz-Carlton with one bedroom, a dining room, a living room and a study costs $2,500 per night, or $77,500 a month. Compare that with Washington D.C.’s most expensive rental--a-14,000-square-foot, six-bedroom stone and brick estate with hardwood floors, terraces, balconies, granite kitchen countertops, lawns and a heated pool for $12,500 a month.
Film and television producers will also rent such properties as sets for filming movies or reality shows. The costs associated with renting mansions on a per month basis are often lower than building a comparable set from scratch. What’s more, high-end rentals take less time and effort to prepare, which helps keep actors, directors and investors happy.
Local industries supply a constant stream of executives looking for luxurious digs but not long-term commitments. In Houston, where oil is king, brokers cater to foreign and domestic energy executives. In Washington D.C. it’s the political crowd making short-term residency plans, and in New York investment bankers and hedge fund managers with plenty of money to burn gobble up townhouses and penthouses.
In smaller cities like Boston or San Francisco, limited space means a steadier market.
“On the waterfront it comes down to supply and demand,” says David Green, a broker at Otis & Ahearn in Boston. “People want waterfront property, and there’s not much out there to purchase, so ultimately prices hold their own value.”
Overall the nation’s rental market is performing very well. That’s because, a slowing housing market has made some renters hold off on buying, choosing instead to stay put in case prices dip even further.
Since the end of 2005, when the housing bubble began to burst, vacancy rates have ballooned to 2.5%, nearly a 50% increase from the 10-year average. Builders have more inventory, and sellers are finding fewer buyers interested in purchasing property.
“From the end of 2005 through middle of 2006 was a rental market frenzy akin to what we saw in the 2004 purchase market, which lead to bidding wars and luxury rents growing 20% to 25%,” says Jonathan Miller, CEO of Miller Samuel, a residential real estate appraisal firm. “Potential buyers of property were taking a position of concern about the future, no one wanted to buy into a market that was potentially going to correct.”
What does this mean in the ebb and flow of rentals versus housing? “People are sitting tight in rentals to see what mortgage rates will do,” says Miller. “Nationally, expect the rental market to remain relatively robust for the next couple of years.”