SANTA BARBARA, CALIF. — Following an unsteady year in 2020, the multifamily sector is taking a leap in the early half of 2021, according to the latest Yardi Matrix National Multifamily Report.
In April, multifamily rents rose 1.6 percent year-over-year, which Yardi Matrix says is the highest increase seen since the beginning of the pandemic. The firm reports overall rents increased by $10 in April to $1,417 per month, the biggest single-month gain since June 2015.
National average rents over the last two years. Source: YardiMatrix. Click to view larger.
Rent Growth, Occupancy Levels Across Different Markets
Most markets saw month-over-month rent growth. Twenty four of the top 30 markets that Yardi Matrix tracks saw month-over-month rent growth exceeding 0.5 percent, and all gateway markets experienced positive gains from March. All gateway markets had positive rent growth for the trailing three months as well, with Miami’s rent growing 0.8 percent, Chicago 0.5 percent and Boston 0.4 percent.
However, some gateway markets are still struggling compared to where they were a year ago, including Washington, D.C., with only a 0.2 percent growth. New York City, San Francisco and Seattle all experienced 0.1 percent rent growth. Yardi Matrix says that these gateway markets that are behind are expected to experience rent growth this summer.
One of the six markets that had negative year-over-year rent growth was Austin, which had a 10 basis-point decline in rents. However, Yardi Market says the capital of Texas is expected to see 3.5 percent growth at year-end 2021.
The markets that have seen the biggest rent growth are the Inland Empire, Sacramento and Phoenix. Yardi Matrix says these markets have had steady rent growth for years. The Inland Empire had 9.4 percent rent growth on a year-over-year basis; Sacramento had 8.4 percent rent growth; and Phoenix had an 8.1 percent rent growth. Over the past five years, rents in the Inland Empire increased by 31 percent, while rents in Sacramento and Phoenix have each had a 34 percent growth in rent over that time frame.
These rent growth numbers are considerably higher than the national rent growth of 12 percent during the past five years. Additionally, 117 out of the 134 markets, or 87 percent, that are tracked by Yardi Matrix had positive year-over-year rent growth in April.
Additionally, Yardi Matrix found that about one out of every 14 multifamily properties has seen occupancy rates drop by 5 percent or more over the past year. The cities with the biggest declines in occupancy were New York City, San Jose and Los Angeles, with New York City struggling the most. Nearly a third of New York City’s apartment properties experienced a 5 percent decrease in occupancy, and one out of 10 properties saw a decrease exceeding 10 percent.
Yardi Matrix predicts it will take at least three years for New York, San Jose and Los Angeles — as well as San Francisco and Chicago — to get back to their occupancy levels from before the pandemic.
Renters Still Struggle to Pay Due to Pandemic
Nationally, the U.S. multifamily sector has several tailwinds at its back. Millions of people have received their COVID-19 vaccines, and pandemic-related restrictions are being lifted all across the country. In the week that ended May 15, the U.S. Department of Labor reported 444,000 first-time unemployment insurance assistance claims, which was the lowest number of weekly claims since before the pandemic. And the first quarter saw the U.S. gross domestic product (GDP) grow at an annualized rate of 6.4 percent.
Despite an improving economy, occupancy has decreased in several markets, and many people are still struggling to fulfill their rent obligations. In order to help out renters and landlords who are currently struggling due to the pandemic, the U.S. Treasury Department said on Friday that it has given out more than $6 billion to those in need in the multifamily industry.
And on June 30, the national eviction ban will end, but CNBC says that one out of seven adult American renters remain behind on their rent and are in jeopardy of eviction. The news outlet also reports that Congress has given out more than $45 billion in assistance between the last two stimulus packages to renters and landlords.
Yardi Matrix is a commercial real estate research platform from Santa Barbara-based Yardi Systems Inc. The service gives property-level information for the multifamily, office, industrial and self-storage sectors for subscribers.
— Julia Sanders