In the wake of a sluggish sales market, some would-be luxury sellers are renting out their properties rather than letting them potentially sit idle for months at a time—and in many areas this newfound luxury rental market is booming.
In southwest Florida, “our rents are up 50% over two years ago,” says Giovanna D’Alessandro, director, rental division and managing broker, Premier Sotheby’s International Realty, which is based in Naples, Florida, and also covers Sarasota, Bradenton, and the Tampa metro market. “People are flocking here,” she says.
Southwest Florida: Luxury Owners Rent Out Their Homes to Wait Out Market
This area of Florida was undervalued for many years and now prices have come up, she says. “We’re now neck and neck” with east coast communities like Miami, Palm Beach County, and Fort Lauderdale, she says.
“On the southeast side, folks are looking for that vibrancy and nightlife,” D’Alessandro says. “The southwest side is more about the outdoor experience. And you have more privacy—we have stretches of beach where you may not see another person.”
“I think we will be at this level for the next three or four years,” she says. “I’m optimistic.”
During the pandemic, homeowners found renters on their own, through services such as Airbnb or just word of mouth, she says. Now amid more competition it’s challenging to find renters, and “folks are turning to us to fill their houses.”
Among rentals in her market, luxury is usually defined as properties over US$10,000 a month, D’Alessandro says. Short-term luxury rentals, which are usually furnished and may rent by the week or month, go for US$10,000 a month up to US$80,000. “The highest-end luxury rentals we manage are US$100,00 to US$150,000 per month for seasonal rentals (January through April),” she says.
As for annual rentals in the luxury market, these range from US$15,000 to US$30,000 per month.
Rates are dependent on a number of factors, including the location, amenities, quality of the furnishings and finishes, and proximity to the beach, she says. “A location next to the Gulf of Mexico is key.”
Renters are “definitely from the Northeast—New York, New Jersey, Pennsylvania, Massachusetts, Connecticut, and we get a huge draw from the Midwest—Ohio, Minnesota, and Michigan, and Canadians,” D’Alessandro says.
The southwest Florida market is seeing a slight retraction of rental rates, about 10%, in part due to ample inventory, she says. In light of this, owners are waiting out a sluggish sales market and putting their houses up for rent. “Most are second-home owners who may only come to Florida two or three months a year.”
D’Alessandro doesn’t think the luxury rentals are impeding overall inventory, though. “Every new wave of renters or tenants brings potential buyers. They may be waiting it out for the right time to buy,” but renting “gives them a taste of what ownership could be. Most people rent before they buy.”
Italy: Luxury Renters Snap Up Top Lifestyle Properties
“The luxury rental market in Italy is booming, with more and more interest every year,” says Lodovico Pignatti Morano, managing partner, Italy Sotheby’s International Realty, which has 14 offices throughout the country.
In particular, there is a lot of interest in Tuscany, Sardinia, Capri, and Puglia, and his office has started to rent apartments in Rome, he says. “People want to enjoy the local life, the culture, the arts, the glamour.”
“We have seen an increase in demand for high-end accommodations, an increase in demand from abroad to come over to Italy to enjoy the lifestyle,” Morano says. “That has pushed some owners to convert their own homes into rentals.”
His office’s retreats division, which was established in 2016 and handles rentals throughout Italy, is doing well, with about 300 properties for rent, he says. There are some properties available for €5,000 a week, but most start at €10,000 and go up.
The luxury renters are “Americans, English, not Europeans, and Saudis and (those from) the Gulf,” he says. The owners of the properties vary, but are primarily Italian.
As far as how this booming rental market is affecting overall inventory, “we’ve seen a slight reduction in available properties for sale,” Morano says. “In some areas, yes, it is a big deal. It does limit options for local renters and can sometimes drive up property prices, but that is rare,” he says.
In large cities like Rome and Milan, rentals are more long-term rather than short-term seasonal rentals. These two cities also have particularly low inventory, he says. “It can be very difficult to find luxury properties there.”
But many renters do, in fact, become buyers, he says. Full luxury and move-in ready conditions help. “If a renter has an amazing experience, they can become a buyer.”
Colorado: Try-Before-You-Buy Mentality and New Condos
Valerie Forbes, director of broker relationships and rentals, Aspen Snowmass Sotheby’s International Realty, is seeing similar trends in Colorado.
“People want to try out different areas to see what they like before they buy,” she says. “Tenants that do visit lead to sales.”
Forbes says they have “over 220 luxury rental listings,” most of which are private single-family homes rather than condos. “We still continue to excel in our numbers, year over year. I hit my end-of-year goals [for rentals] by the end of September 2023,” she says.
“We’re seeing more rentals in the US$100,000-plus range,” which would be for a four- or five-bedroom house in Aspen, she says.
For the 2022/23 winter, the average seasonal rent for a single-family home in Aspen was US$65,000, compared with an average summer 2023 rental of US$90,000, she says. The winter trend is to stay one to two weeks, while summer stays tend to be one to two months.
In nearby Snowmass, the average winter rent was US$38,000, compared with US$37,000 in the summer, for the entire season.
For comparison and perspective, the average price for a single-family home in Aspen is now US$14 million, Forbes says.
Renters come from the same places buyers come from, she says, namely Texas, Florida, California, Colorado, and Illinois.
Aspen is definitely more popular for rentals than Snowmass, Forbes says. “People want to be in Aspen in that four- to five-bedroom house. They want updated and really exclusive, with a lot of entertaining space and high-end artwork, and space perhaps for a nanny or other staff.”
Pools and hot tubs are also popular amenities, she says.
Snowmass has a “number of new condo developments and those condos are now trickling into the rental pool,” Forbes says.
“ People want to try out different areas to see what they like before they buy...Tenants that do visit lead to sales.”
Valerie Forbes
Director of Broker Relationships and Rentals Aspen Snowmass
Sotheby’s International Realty
Hamptons: A Post-Lockdown Dip Hits Luxury Rentals
In the Hamptons, many owners of high-end rental properties got spoiled during the Covid-19 pandemic because demand was high, inventory was down, and it was easy to find tenants, says Frank Bodenchak, senior global real estate advisor, Sotheby’s International Realty - Bridgehampton Brokerage. “Some renters were staying for two years or renting sight-unseen.”
During Covid, there was a 15% cut in available rental inventory as many landlords used their homes themselves for part, and sometimes all, of the period they’d normally rent, he says.
Now the supply is increasingly back to normal, and demand is down, especially for long-term rentals, Bodenchak says. People who previously rented for the summer may be renting for just a month now.
This past summer, “owners who got complacent with their homes during Covid had quite a wake-up call, and many who insisted on Covid prices went unrented,” Bodenchak says. “It especially hurt the homes that are in the bottom 50% and need renovation or new furniture.”
Prices for luxury rentals in the Hamptons came down 10% to 15% for 2023, compared with their Covid peak a couple of years ago, he says.
Owners are beginning to realize that they need to “update their homes to reflect what tenants are looking for—properties in great condition—newer furniture, neutral colors, and tasteful artwork,” he says.
“With one normally compelling Water Mill South property,” the owner had not made improvements for three years because he had locked in year-round tenants during the pandemic, Bodenchak says. “When the property came back as a new rental listing, we did 27 showings without offers.”
After he and his team worked with the owner to make US$15,000 in painting and furniture improvements, the house “rented immediately for August for US$110,000,” he says.
In the Hamptons, “luxury” is defined as US$5 million to US$25 million for sales, and luxury rentals typically range from US$250,000 to US$1 million for the summer, he says. “Some oceanfront properties will go for US$1 million a month, but those are rare.”
An almost new house done by a designer with new furniture may get US$300,000 to US$400,000 for the summer, he says. “I had one that just got US$110,000 for Labor Day week.”
As for consistently hot areas, “Southampton Village has fared the best,” Bodenchak says. “They have a loyal following of tenants who come back year after year.”
High-end Hamptons renters are mostly from the greater New York metropolitan area, “but now about one-fifth of my renters are from Florida, especially the Palm Beach and Miami area,” he says. “They may have made Florida their primary residence, but they don’t want to be there during the hottest months. And I always have renters from London, who may be expats.”