Multifamily Emerges from the Pandemic with a Bang

During the pandemic, multifamily fundamentals were just fine. The market segment wasn’t experiencing the resiliency and rapid growth of industrial—the shining star of 2020—but it also didn’t struggle like office and retail properties. Overall, multifamily rent collections remained strong throughout the year, albeit lower than pre-pandemic rates, and while rents in select major metros fell, smaller cities had some rent growth. It was all just fine—a passing grade.

In 2021, as the pandemic has receded and vaccines have been distributed, the multifamily market is far more than fine. Fundamentals have roared back, and investors are seeing rent growth, tight vacancy rates and positive migration patterns across the country. It is safe to say that multifamily is enjoying its recovery.


Rents are increasing as rapidly as they fell across the country. From January to June, rents have increased 9.2%, according to research from Apartment List. Before the pandemic, apartment rents in the US increased an average of 2% to 3% from January to June. “The multifamily market is extremely hot, everywhere. Most recently in June, we measured rent prices rising in every single one of the nation’s 100 largest cities,” says Rob Warnock, senior researcher at Apartment List.

Yardi Matrix pegs national apartment rent growth at 6.3% year-over-year for June, the largest growth in the company’s history. Lifestyle apartment properties and single-family rentals are leading the upward trend in rent growth with the latter seeing a record 11% boost in average rents this year.

Roberto Casas, senior managing director at JLL, has seen a similar surge in rents, particularly in the second quarter when effective rents rebounded 4%. “Overall, the sector has experienced an abbreviated recovery,” he says, adding that on an individual basis, some cities are seeing double-digit rent growth this year. “Many markets are currently extremely fluid, and we see continued rent growth with many markets seeing trade out rents of anywhere from 5% to 20%.”

Rents are trending up in every market. A concessions report from Berkadia Institutional Solutions that surveyed 223 class-A apartment buildings in San Francisco, found that rents in the city increased 9% from April through June and concessions had fallen to only 3.2 weeks, a stark contrast from the average 7.1 weeks of concessions offered on average at the beginning of March.

However, while rents have increased in San Francisco, they have not returned to pre-pandemic levels. According to Apartment List data, San Francisco prices have rebounded 17% this year, not enough to offset the 26% fall in 2020. “There are still a handful of cities where prices remain below pre-pandemic levels. But, except for a handful of cities like San Francisco, rent prices have rebounded completely,” Warnock says.

Secondary markets continue to lead in rent growth, as they did during the pandemic, according to data from Yardi Matrix. Phoenix rents are up 17%, Tampa and the Inland Empire tie for second place with 15% rent growth and Las Vegas and Atlanta round out the top five with 14.6% and 13.3% rent growth, respectively.

These trends represent a return to normalcy for the apartment sector. “The multi-housing market has upheld its defensiveness and has outperformed pre- and post-pandemic,” says Casas.

During the pandemic, many believed that there would be a long-term exodus out of major metros, but that forecast hasn’t held up in the early days of the recovery. Warnock says the two hottest apartment markets in terms of rent growth are small rapidly growing cities offering relative affordability and major metros, which have rebounded rapidly.

The top ten cities for apartment rent growth illustrate the mix. Boise, Idaho, is at the top of the list with 26.9% rent growth, but Spokane, Tampa, Austin and Arlington are all examples of other growth markets leading the nation for rent increases. Mixed in are San Francisco, New York, Chicago and Seattle, which all have rent growth in excess of 15%.

“Vacancy rates are extremely low right now, creating a very competitive market that allows landlords to raise their prices,” Warnock says.

Apartment rent growth is likely to peak in August and September before cooling off in the late fall and winter when most renters stop moving. “We’re seeing signs of this again in 2021, as rent growth is decelerating a bit in many places,” says Warnock. Given how competitive markets are right now, and how tight vacancies are, we don’t expect there will be a major seasonal reprieve this winter.”


Long before the pandemic, renters started to migrate out of major metros to more affordable and often weather-friendly cities in the Sunbelt region. The global pandemic exacerbated the trend, and renters flooded out of cities at an alarming rate. With remote work allowing employees to live away from the office, many chose to live outside of their current city. In total, 16% of full-time employees moved from April 2020 to April 2021, according to research from Apartment List.

Some experts pontificated on what the pandemic-fueled migration would mean for urban markets. But, early in the recovery, renters have already returned to urban markets in droves. Apartment List data shows that people are moving again post COVID. Among those that moved during the pandemic, 20% have moved again this year, and Apartment List forecasts another 30% of renters are planning to move.

While renters have returned to urban markets, the Sunbelt region continues to see positive inward migration and corporate relocations. “Population gains and job creation in key growth secondary markets dramatically outpaces most gateway cities,” says Casas. “The Sunbelt markets report significantly greater rent and occupancy growth.” Atlanta had 12% rent growth; 9% in Miami and Charlotte and 7% in Austin.

Warnock agrees the demand is growing in both big and small cities as part of the recovery, adding that secondary cities remain exceedingly popular among renters. “Even after experiencing some major price increases in 2020, most secondary markets are still cheaper than nearby urban centers, especially on a cost-per-square-foot basis,” he says. “So they attract all kinds of renters: those struggling economically who need to find more affordable housing; those looking for more physical space; and those gearing up to buy a home.”

Investment capital, on the other hand, is staying put in secondary metros. Investors Management Group, a multifamily investor with a 4,000-unit portfolio in eight states, is seeing the strongest demand in secondary and tertiary markets. “We’re currently seeing a resurgence of strong market fundamentals in each market,” says Neil Schimmel, CEO of Investors Management Group. “With the significant shift away from big cities and high-cost coastal markets, we’re seeing record high occupancies across our portfolio of garden-style apartments in secondary/tertiary markets. Our firm has always specialized in smaller, emerging metros, so we’ve been able to maintain our same investment strategy and increase our transaction volume over the last 18 months.”


The return of apartment demand, leasing activity and rent growth has caught the attention of investment capital. In the first half of the year, transaction volume has increased 30% to a total of $71.3 billion, according to research from JLL. Casas expects more growth in the second half of the year due to increased requests for broker opinion on value. He attributes the acceleration to the pent-up demand on the selling side and the reopening of urban markets. “As urban centers continue to open they are also beginning to experience positive leasing momentum,” he says.

In this case, secondary markets are taking the lead. Sales activity has already returned to pre-pandemic levels in growing small metros, but major cities are another story. “The gateways, such as New York City, have been slower to recover, but, as markets re-open, sellers are becoming optimistic, and we expect to remain busy over the next 18 months and into 2022,” says Casas. “New York City, San Francisco and Chicago leasing velocity has rebounded quickly and seems to be setting records every month.”

Investors Management Group also sees the upside in the multifamily market and notes that many of the negative trends like low rent collections and rent decreases are going to be temporary. “During market turmoil, multifamily rent declines are typically short-lived, and vacancies only increase briefly and by modest amounts. Given its resilient qualities, buyers turn to multifamily as a safe bet,” says Schimmel. The increased competition for apartment assets has also pushed pricing higher across the US, as well as compressed cap rates. Casas says that cap rates are 25 to 50 basis points lower than they were at the beginning of the year.

While Investors Management Group is sticking to its core strategy, which is to buy at an “attractive price per pound in locations that are affordable for renters,” it is looking at new markets. The firm hasn’t changed its strategy but it has changed how it sources and vets new deals. “The pandemic has broadened our approach to multifamily market analysis. We’re looking at the same metrics but from a different perspective,” says Schimmel. “At the national level, we’re comparing how different US metros have responded to the impacts of the pandemic, and which local economies are leading the recovery in terms of sustainable job gains and population growth.”

Casas is currently seeing the most demand for suburban apartment products, but he says that demand should increase in cities following business reopening and lifted COVID restrictions. “Investors like the quality and the durability of the cash flow,” he says. “Suburban assets are the most desirable; however, as markets re-open, investor demand for urban assets has gradually increased. Investor demand continues to be propelled by strong leasing momentum, dry powder and low cost of capital for both debt and equity.”

Schimmel says his firm is taking a cautiously optimistic approach to underwriting deals, given there is still some uncertainty. “We’re taking our foot off the gas pedal, so to speak—but we’re not slamming on the brake, either. We’re finding that delicate balance between aggressive and conservative underwriting to maintain our reputation of delivering predictable, risk-adjusted returns for our investors. Our underwriting supports solid submarket fundamentals and growing renter demand, but is also sensitive to the economic challenges the renter demographic continues to face.”


In terms of leasing and demand, Warnock says that Apartment List believes remote work has the potential to significantly impact apartment leasing. “The widespread adoption of remote work is something I think will impact the apartment market for the foreseeable future, well after the pandemic subsides,” he says. “Although some companies have started bringing staff back to the office, 40% of workers we surveyed earlier this summer said their employers have signed off on either a hybrid- or fully-remote work arrangements going forward.”

Warnock notes that this is a fundamental, cultural change. Apartment investors and developers have long focused on supplying apartments close to job centers, but that might no longer be a key ingredient of the investment thesis. It also means new opportunities. “ “Similar to how certain cities are offering financial incentives to lure remote workers, apartment communities stand to gain from offering amenities and flexibility that caters to a more mobile workforce.”

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