Commercial real estate data company Yardi Matrix has updated its multifamily rent forecast for 2021, with Phoenix among several markets that received an upward revision in expected rental rate growth.
Rents in the Valley are expected to grow by 8.7% — which is a 2.7% increase from the earlier prediction. That rate of growth is significantly stronger than the next two highest markets on the list: Tampa-St. Petersburg, Florida (6.4%) and eastern Los Angeles County (5.5%).
Peter O’Neil, research director for NorthMarq, said Maricopa County has been the top county in the country for population growth in each of the last three or four years.
Plus, he said, metro Phoenix has consistently been attracting top companies bringing high-wage jobs to the Valley, with Taiwan Semiconductor Manufacturing Co. Lt. being the latest example.
Overall, it is smaller cities that today have relatively affordable rents that are expected to see the biggest gains.
“The vaccine rollout was going so much faster than we were expecting,” said Andrew Semmes, senior research analyst at Yardi Matrix. “In March or April, a lot of these markets, responding largely to that, starting seeing very big increases.”
Yardi Matrix looked at 30 of the largest markets across the United States for its updated forecast.
But, Semmes said, some of the biggest increases could be felt in secondary markets not captured in the report. Boise, Idaho; Reno, Nevada; and Portland, Maine, are some of the metro areas seeing fast population growth coupled with constrained supply.
Boise, for example, saw 11.6% rental rate growth in the first quarter of 2021, compared to the same time last year. Yardi Matrix predictions for Boise in Q3 and Q4 are 10.7% and 9.6% increases year over year, respectively.
Reno posted a 5.3% year-over-year rent increase in Q1, and 7.9% growth is projected in both Q3 and Q4.
A shift to more remote work is helping propel growth in smaller cities, Semmes said.
“People are realizing, ‘Hey, I don’t necessarily have to live downtown in a major city, close to the office. I can get a lot of the same amenities in another city and I don’t have to pay as much,'” Semmes said. “I think that’s a large driver of that.”
Gateway markets are starting to see a recovery after across-the-board rent drops last year but still have more of a runway, Semmes said.
Inflation also may play into how much rental rate growth the multifamily industry will see longer term.
“What should be transitory inflation in certain sectors due to logistics and pandemic-related supply-chain issues is now threatening to be much broader and could have a real impact on purchasing power, which would limit the ability to push further rent increases,” Semmes wrote in the report.
Doug Ressler, manager of business intelligence at Yardi Matrix, said any true impact of inflation still remains to be seen. But more people are talking about inflation and are starting to factor it into expectations, he continued.
Among the 30 markets examined, Yardi Matrix posted downward revisions in several markets for rent growth. They include San Antonio; east and west Houston; Boston; urban submarkets in the Twin Cities; Orlando, Florida; and the San Francisco Peninsula.
But all are still expected to see some amount of rent growth. YardiMatrix is projecting a 4.3% increase in Orlando, the highest among the seven, and 0.3% for the San Francisco Peninsula area, the lowest.
Here are the markets that saw the biggest upward revisions, based on Yardi Matrix forecast data released June 30:
- Phoenix: 8.7% — 2.7% increase from prior prediction
- Tampa-St. Petersburg, Florida: 6.4% — 2.5% increase from prior prediction
- Eastern Los Angeles County: 5.5% — 2.1% increase from prior prediction
- Chicago (urban): 4.8% — 1.7% increase from prior prediction
- Las Vegas: 6.2% — 1.6% increase from prior prediction
- Atlanta (urban): 4.7% — 1.6% increase from prior prediction
- Inland Empire (Southern California): 7.1% — 1.5% increase from prior prediction
- Atlanta (suburban): 6.9% — 1.5% increase from prior prediction
- North Dallas: 4.4% — 1.5% increase from prior prediction
- Indianapolis: 4.6% — 1.4% increase from prior prediction.
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