In what is normally considered prime leasing season, rents declined nationally by .3% month over month, with the largest drops in gateway markets that were the first to implement pandemic- inspired lockdowns, according to a report released by commercial real estate data and research company Yardi Matrix.
It was an improvement over April, though, which saw rents decline by .5%.
May has historically been a strong month for rental growth, with 3.5% YoY growth in May 2019 and 2.9% in May 2018. The report said not to expect any meaningful growth in the rental market for the next several months.
The markets that were hit hardest were Boston and San Francisco, each down 1%; Chicago, down .9%; and Los Angeles, down .7%.
National rents for lifestyle rentals increased .8% in May, but national rent growth has been sluggish and reached its lowest year-over-year growth since February 2011, the report stated.
Lifestyle rentals in gateway markets were down much more, with L.A. (-3.2%), San Francisco and Boston (-2.5% each) leading the downward charge. The report stated that this could also be impacting the short term corporate rental market as well, as tenants have been fleeing gateway cities since lockdowns began.
While the rental market is down, collections continued to be strong in May, according to the report. Rent collections sat at 93.3% for apartment households, according to the National Multifamily Housing Council.
With the CARES Act funding set to expire in July, with the additional $600 in unemployment benefits in tow, a decline in collections later in the summer seems “imminent”, the report stated.
The HEROS Act, passed by the House on May 15, would extend those additional benefits until January 2021. The $3 trillion spending package is expected to find significant opposition in the Senate. A lack of that additional money, necessary for many who are unemployed to continue to pay rent, is expected to have a significant impact on rent collection rates.
Nationwide, rents decreased by 30 basis points on a month-over-month basis. Over the last two months, rents have decreased by $13, with a national average of $1460. The report said that if this trend continues, the industry could be looking at “alarming numbers” by the end of summer.