Rent Growth Returns to Pre-Pandemic Levels in May

Article originally posted on Multifamily Executive on June 21, 2021

Multifamily rents rose by 2.5% year over year in May, according to the latest Yardi Matrix Multifamily National Report—almost exactly matching the rent growth rate in March 2020, when the COVID-19 pandemic took hold. This is the first time since March 2020 that rent growth has returned to pre-pandemic rates at the national level; a number of regional markets have already met and exceeded this benchmark.

Overall rents rose by $12 in May, up to $1,428. This is the largest one-month rent increase in the history of Yardi’s data set, and the 0.8% month-to-month growth rate is the steepest recorded since June 2015. California’s Inland Empire continues to lead the top 30 markets in YOY rent growth at 10.2%, marking the first time in the metro’s history that YOY growth has reached double digits. Phoenix came in second at 9.6%, followed by Sacramento, California, at 8.3%.

Rents have hit a rebound in many gateway markets. Miami posted the strongest YOY rent gains in the gateway markets, and seventh-highest YOY rent growth out of the top 30 overall, at 6%. Chicago and Los Angeles are expected to turn positive next month, at 0% and -0.1% YOY, respectively, while San Jose (-9%), New York (-8.8%), and San Francisco (-6.7%) have a lot of ground to make up.

All of the top 30 markets showed positive month-to-month rent growth in May, and 90% experienced growth over 0.5%. New York had the strongest month-over-month gains by far at 3.4%, followed by Chicago, Las Vegas, and Portland, Oregon, at 1.1%.

Yardi attributes New York’s outsized growth to elevated demand in the market, given low rents over the past year, as well as businesses reopening—with some, including banks like Goldman Sachs and JPMorgan Chase, mandating a return to the office. For this reason, Yardi anticipates a faster recovery in New York than previously forecast. In contrast, the company attributes slower month-over-month rent growth in Seattle (0.2%) and San Francisco (0.3%) to a high concentration of tech workers more easily able to continue working remotely.

Yardi Matrix also has now expanded its data set to include single-family rental units exclusively in build-to-rent communities, covering more than 90,000 units in 700 communities across the country.

Single-family rents in this category rose by 7.3% YOY in May; this reflects the immense growth in this sector fueled by home purchasing constraints and demand for space. Communities in the Inland Empire showed the strongest YOY rent growth at 18.3%, followed by Phoenix at 15.3% and Denver at 13.5%. Overall single-family rents rose by $14 in May to $1,761, and overall occupancy stands at 96.6% in April, up 1.5% from one year earlier. (Occupancy data is current to the previous month.)