The effects of the COVID-19 pandemic on the multifamily industry continue to be felt with further declines in rent. The national average rent fell by $2 to $1,457 in June, according to Yardi Matrix’s latest National Multifamily Report. Since January, multifamily average rents have decreased by $12.
In addition, for the first time since December 2010, year-over-year rent growth also turned negative, decreasing 0.4% in June, down 70 basis points from a revised 0.3% in May.
West Coast and tech markets are seeing the steepest year-over-year declines, with rents down 4.6% in San Jose and 3.8% in San Francisco. However, many Midwest markets, which offer lower population densities than gateway cities, have held up better. Since January, rents in Indianapolis, Kansas City, and the Twin Cities have all seen slight rent growth.
“Early indicators are pointing to an exodus from many densely populated urban centers. It remains to be seen whether there will be a long-term decline in demand in gateway markets—and therefore a long-term decline in rents—or whether this is a pandemic-induced trend and we will see a return to major cities once there is a vaccine,” noted the report.
According to Yardi Matrix, the rapid year-over-year decline in the Lifestyle asset class also continued in June, with a 1.8% drop nationally. In addition, four of the five markets with the largest Lifestyle declines are in gateway markets.
On a month-over-month basis, rents dropped 0.1% in June, an improvement of 20 basis points over May. Four of the five markets with the largest month-over-month decreases are in California, with San Jose and San Francisco dropping the most.
Rent growth is negative in 19 of the top 30 markets. Tech hubs, such as Seattle (-0.4%), Austin, Texas (-0.3%), and Phoenix (-0.2%), have been hit hard. The three markets all have large amounts of inventory coming online, and Austin and Phoenix are among markets seeing a surge in coronavirus cases.
The Lifestyle asset class also saw lower month-over-month rent growth than the Rent-by-Necessity in 28 of the top 30 markets. The Inland Empire (0.3%) and Sacramento (0.4%) were outliers, with the Lifestyle rent growth higher than Rent-by-Necessity. This could be explained by an exodus of people from expensive California markets, according to Yardi Matrix.
