Finally, Renters Have Some Pull (WSJ 1/20/09)

Now it's a renter's market, too.

As the housing downturn deepens, rental rates are falling in many major U.S. cities, including New York and Los Angeles, and tenants are finding they have greater leeway to renegotiate their leases.

Apartment rents nationwide fell 0.4% in the fourth quarter from the third quarter -- the first drop since 2003, according to Reis Inc., a New York City-based real-estate research company. Apartment vacancies rose to 6.6% in the quarter from 5.7% a year earlier.

According to a report released Tuesday by the Real Estate Group of New York, a Manhattan-based brokerage firm 45% of rents in Los Angeles declined.

In some California cities, vacancy rates are being boosted by the conversion of new condo projects into rentals, says Patrick S. Duffy, principal of MetroIntelligence Real Estate Advisors, a real-estate consulting firm based in Los Angeles. In downtown L.A., where there are a lot of new condos, the vacancy rate was almost 10% in the fourth quarter, compared with an L.A.-wide vacancy rate of 4.5%.

Building owners fear that this summer's crop of college grads will move back home with their parents rather than renting apartments, says Jessica Scully, vice president of Scully Company, a property-management company with units in Pennsylvania, Florida, New Jersey and Connecticut.

The company is offering up to two months of free rent to new tenants at some locations,