A commercial real estate services company is reporting seeingthat landlords of multifamily property are seeing turnover fall tothe lower levels in more than 20 years.

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According to a report by CBRE, turnover, which is the percentageof total rented units that are not renewed each year, fell from47.5 % in 2019 to 42.1 % in April. The report attributes thedecline to historical trends that have been exacerbated due tothe coronavirus pandemic.

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"The continuing long-term decline in turnover has acceleratedrecently due fewer tenants moving because of the COVID-19 economicdownturn," the report said.

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The report, however, said the new isn't all bad, since thebenefits of lower turnover generally outweigh the disadvantages.Specifically, the report said landlords can see cost savings fromcontinuing rent income and from having fewer "make-ready expenses,"which can range between $1,800 and $3,000. Rent increases are alsogenerally higher on renewals than from new leases, the reportsaid.

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According to the report, the COVID-19 lock down mandates andrelated uncertainty have discouraged renters from moving, which hashelped owners maintain occupancy and cash flows. The report alsosaid turnover is expected to rise from April's low, given thatthere's been an acceleration of leasing activity in may. However,the report said, turnover is expected to remain low for the rest ofthe year.

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Historically, turnover has been falling since 2000, when it wasaround 65%. The report said that turnover began rising in themid-2000s because of greater economic opportunity for renters,increased units and an influx of young millennials entering themarket. The past recession led turnover to fall,however,  and only in recent years did it begin tickingback up again, according to the report.

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Despite the overall trends, the turnover rate has differedgreatly depending on the geographic regions. Some real estateinvestment trusts have reported that metro areas like New York andWashington, D.C. had the lowest turnover rates for the firstquarter in 2020. The reports attributed this to the pandemic andseasonal trends. The South and West saw higher turnover rates,while the Northeast and the Midwest also saw lower rates, thereport said.

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These trends likely won't significantly change due to theCOVID-19 pandemic, the report said, but different infection ratesand localized seasonal trends could influence the rate.

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"Northern metros only recently entered the spring leasingseason, so turnover rates were not as affected by the early stagesof COVID-19 as they were in other warm-weather metros that werealready well into the spring leasing season," the report said.

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Max Mitchell

Max Mitchell is ALM's Regional Managing Editor for The Legal Intelligencer, New Jersey Law Journal, Delaware Business Court Insider and Delaware Law Weekly. Follow him on Twitter @MMitchellTLI. His email is [email protected].