Apartment rents rebounding after dismal 2020

In February, metros across the country saw effective asking rents for U.S. apartments jump 0.6% over the month before, which was the fastest single-month increase since mid-2019, according to RealPage, Inc.

Boston, Chicago, Los Angeles and San Jose experienced upward movement of 0.6% to 0.7%, while San Francisco, New York, Washington, D.C. and Seattle rents rose 0.1% to 0.3%.

RealPage attributed the ascent to abnormal leasing activity. Typically, the market is weak when temperatures are at their lowest.

The month-over-month movement is a positive step, but year-over-year tells a different story, with effective asking rents still sitting at negative 0.9%. In fact, year-over-year rents are down 20.8% in San Francisco, 16.5% in San Jose and 14.4% in New York. Seattle and Boston are both floundering around negative 8%. Washington, D.C., Los Angeles and Chicago are faring only slightly better, with annual rents off between 5% and 6%.

Smaller metros seem to be having better luck. Riverside/San Bernardino had the largest annual rent change, swelling 9%. It was followed by Sacramento (6.7%), Memphis (6.5%) and Greensboro/Winston-Salem (5.9%).

With the exception of Detroit (up 4.6%), the top 10 metros with year-over-year rent increases were all in areas with milder climates: Virginia Beach (5.6%), Phoenix (5.2%), Las Vegas (5%), Tampa (4.5%) and Atlanta (4%).

These numbers may not tell the full story, however. Baker Tilly’s Q4 2020 Commercial Real Estate Report discussed Apartment List’s quarterly renter migration report, which found that more tenants, particularly those moving to areas new to them, are seeking leases of six months or less, indicating their moves may not be permanent.

All of that said, U.S. apartment occupancy for February was 95.4%, which is about where it has been since late 2019 and is in line with February 2020’s 95.5% level.

To see if the trend continues, keep an eye out for our Q1 2021 Commercial Real Estate Report in April.

For more information on this topic, or to learn how Baker Tilly specialists can help,  contact our team.