Rents at new highs and rent growth slowing
While occupancy rates have fallen in cities like Las Vegas and Phoenix, slower migration and household formation have caused rents to climb in key Sun Belt and West Coast metros. (Source: Yardi Matrix Multifamily Report)
Nevertheless, occupancy is increasing in gateway cities that saw population decline due to the pandemic, such as San Jose, California (2%), and New York City (3%). (1.5 percent ).
Household formation, together with immigration and migration, were the three demand factors that had the most influence on rent rise and occupancy in 2021, according to Yardi. According to the San Francisco Federal Reserve, many people went out to create new homes in 2021 after initially residing with relatives and friends during the epidemic, which increased the “headship” rate.
Due to the pandemic and tighter immigration regulations, there has been a decline in foreign immigration during the past five years. However, Yardi points out that, from the first quarter of 2021, rents and new unit absorption have increased practically everywhere, making the target markets for remote workers considerably less affordable. In 2021, many remote employees did move to less costly regions. As costs increased, certain cities—including Denver, Nashville, Tennessee, and Austin, Texas—lost households.
The average asking rent in single-family build-to-rent communities increased by $23 to $2,071 in June, while year-over-year rent growth decreased by 90 basis points to 11.8 percent. Orlando continues to be the market with the most robust BTR rent increase, outpacing other top metros by a wide margin (46.7 percent YOY).
Even with this expansion, there are fluctuations in sector occupancy. Over the previous year, single-family BTR occupancy decreased 10 basis points countrywide, with the only eight BTR markets Yardi Matrix is tracking an increase in occupancy. High-performing Orlando witnessed no change in occupancy, while Raleigh, North Carolina, experienced a dramatic decline of almost 5%.
The most populated metro areas continue to have substantial rent rise, with 25 of the top 30 reporting YOY growth of above 10%. Orlando, Miami, and Tampa in Florida continue to set the pace, each with a YOY rent gain of over 20%.
Our thesis of garden-style apartment success over time will continue to be in demand as living situations shift and change to new lifestyle choices.
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