The first half of this year saw outstanding rent growth in multifamily rental properties and while that is probably not going to be sustained, strong multifamily performance will continue in the second half of 2021, according to Yardi Matrix.
In their summer report for 2021 entitled “Multifamily Emerges Strong from the Pandemic,” the company says that while rent growth seen in the first half of 2021 cannot continue indefinitely, “conditions for above-average growth in these metros (southwest and southeast) are likely to persist for months. With rents increasing by almost double digits in many markets on a year-over-year basis, the cost-of-living gap between what have been considered “lower-cost cities and gateway markets is starting to narrow.”
The rapidly growing tech hubs of Phoenix, Las Vegas, Atlanta and Tampa show that, “People migrating into these cities can afford the large price increases. But longtime residents are deeply affected by the accelerated rent growth,” Yardi Matrix says in the report.
Why conditions for continued growth are strong
- Pent-up demand and the recovering economy have produced robust rent growth this spring.
- The U.S. economy is growing at its fastest rate in decades, as progress with the COVID-19 vaccine has allowed people to resume normal activities.
- Potential headwinds include rising inflation and whether employees can find enough workers.
- Many secondary markets continued to post dazzling increases, and gateway markets such as New York and San Francisco are rapidly rebounding from the pandemic.
- New apartment supply, which dipped only moderately during the pandemic, is expected to bounce back to about 334,000 units in 2021.
- Capital markets remain one of the strongest aspects of the multifamily business.
While the economy is coming back, employment and labor participation are still lagging, especially in the service sectors that were hit hard by the pandemic, the report says.
New apartment construction is particularly affected by supply-chain issues and challenged with dramatically rising steel, lumber and copper prices; copper and lumber prices have more than doubled from this time last year. “Not only is demand for building materials coming back in full force but pandemic restrictions are making it more difficult to obtain them,” the report says.
“Volatility is likely to continue for a few years as the world fights to contain the virus, until global vaccine implementation allows economies to fully recover and return to pre-pandemic stability. However, that does not mean there won’t be strong economic growth in certain sectors and geographies in the short term,” Yardi Matrix says in the report.
About Yardi Matrix:
Yardi Matrix researches and reports on multifamily, office and self-storage properties across the United States, serving the needs of a variety of industry professionals. Yardi Matrix Multifamily provides accurate data on 18+ million units, covering more than 90 percent of the U.S. population. Contact the company at (480) 663-1149