Secondary Markets Drove Multifamily Rent Growth in March

Secondary Markets Drove Multifamily Rent Growth in March

Multifamily rent growth and increases are dominated more and more by secondary and tertiary markets that are producing a disproportionate share of economic and population growth, and where rents are low enough that they can be raised without overly burdening tenants, according to the latest report by Yardi Matrix.

Overall U.S. multifamily rents jumped $4 in March 2019 as market dynamics “continue to be healthy almost everywhere,” said the report.

It was a steady first quarter for multifamily rent growth

  • While U.S. multifamily rents increased by $4 in March to $1,430, year-over-year growth dropped by 20 basis points to 3.2%, as rent growth was slightly less than the same period in 2018.
  • Nationally, rents were up 0.4% in the first quarter. The numbers demonstrate consistent growth, although not as strong as other first quarters in recent years. For example, rents grew by at least 0.8% in the first quarter between 2014 and 2016. Still, the market’s consistency remains a point in its favor.
  • Las Vegas (7.5%), pictured above, and Phoenix (7.2%) continued to top the nation’s growth in March on a year-over-year basis. Rent growth remains strong across the board, with Kansas City and Houston the only metros in our ranking that saw gains below 2.0% in March, according to the report.

Secondary Markets Drove Multifamily Rent Growth in March

Bigger markets still performing well

“To be sure, bigger markets are not performing poorly—not even close. San Francisco (3.9% year-over-year) and Los Angeles (3.4%) are seeing rent growth above the 3.2% national average, and primary metros Boston (3.1%), Chicago (2.7%), and Washington, D.C. (2.5%), are not far below it.

“The dynamics continue to be healthy almost everywhere. That gives investors a choice between potentially higher growth and higher yields in faster-growing, less-liquid markets, or slower, steadier growth in larger, more liquid markets,” Yardi Matrix said in the report.

Multifamily rent growth strong at the start of spring

As rental season comes into full swing, all but one market, Portland, had positive trailing three-month  (T-3) rent growth.

Oregon recently passed rent control through the state legislature. While the initial bill allows for rent growth well above the national average, many in the industry are concerned it will lead to more stringent regulation.

Highlights of employment, supply and occupancy trends

  • February’s weak job growth number and decelerating GDP growth are signs that the expansion is slowing.
  • In response to those and other developments, the Federal Reserve said it would only hike policy rates once in 2019 and not at all in 2020. Treasury rates dropped sharply as investors worry about weaker growth.
  • While slower growth is not good for the multifamily market, tenant demand is likely to remain robust and investor demand shows no signs of weakening.

“The Federal Reserve’s decision to put rate increases on hold, coming on the heels of February’s weak job growth and decelerating fourth-quarter GDP, has created concerns about the economy’s health.”

Should the multifamily industry be worried?

“The short answer is no, not yet.

“But at the same time, as growth decelerates, the economy loses some of its ability to absorb negative pressures,” the report said.

About Yardi
Yardi® develops and supports industry-leading investment and property management software for all types and sizes of real estate companies. Established in 1984, Yardi is based in Santa Barbara, Calif., and serves clients worldwide.

Yardi Matrix is the industry’s most comprehensive business development and asset management tool for investment professionals, equity investors, lenders and property managers who underwrite and manage real estate investments in multifamily, industrial, office and self-storage. Email, call 480-663-1149 or visit to learn more.