Nationally, the rental story isn’t a great one, according to the Apartment List National Rent Report of 2021.
As we hit the seasonal lull, December rents fell by 0.4 percent month-over-month, while the national rent index is now down 1.5 percent year-over-year and has fallen for four consecutive months.
By comparison, December’s rents were 0.2% in 2019, 0.2% in 2018, and 0.3% in 2017. Sixty-five of the nation’s 100 largest cities saw rents drop in December 2019. Only 57 saw rent drops this year. “Fewer cities got cheaper, but those cities got cheaper faster,” according to Apartment List.
The national numbers don’t tell the entire story of 2020 though. With the option to work from home, many people fled large cities for suburbs or smaller and mid-sized cities. That showed up in Apartment List’s numbers. The cities with the highest rents in March suffered the steepest declines.
For instance, in San Francisco, rents have fallen 26.7% since March. Median two-bedroom apartments have dropped from $3,147 to $2,305 in the city. Seattle saw a 22% rent drop since March. It was followed by Boston (-20.6%), New York (-19.9%), Washington DC (-15.3%), San Jose, Calif., (-15.2%), Arlington, Va., (-14.8), Oakland, Calif. (-14.2), Chicago (-13.2) and Minneapolis (-12.8).
“It is notable that these markets are some of the most expensive in the country, and they all have a high share of their workforces employed by the sorts of companies that have been quick to embrace remote work. No longer needing to be close to the office, and with many local amenities still closed, some of these workers may be questioning their choice of location,” according to Apartment List.
In smaller, more affordable cities, the situation was different. Boise saw rents increase nearly 10% since March, which was more than double the rent growth it experienced during the same period last year. Boise was followed by Chesapeake, Va. (8.8%), Fresno, Calif (7.9), Greensboro, NC (7.7%), Toledo, Ohio (7.6%), Albuquerque, NM (7.1%), Bakersfield, Calif (6.9), Memphis (6.7%), Riverdale, Calif. (6.6%) and Chula Vista, Calif. (6.5%).
Many of these cities are within drives of larger metros. Apartment List points out that Greensboro, NC is within a 90-minute commute of Charlotte, Chula Vista is near San Diego, and Riverside is a commuter city for Los Angeles.
“As the priciest cities lose some of their allure, interest in more affordable mid-sized cities appears to be picking up, potentially driven in part by renters taking advantage of remote work arrangements,” according to Apartment List. “As many of us continue to spend the majority of our time at home, it is unsurprising that some are now seeking out new locations where they can afford more space.”
While there has been a definite migration to suburbs and smaller cities, there is still an open question of whether this is a permanent shift.
“Whether these relocations will stick after the pandemic is the big question,” said John Chang, SVP and director of research services at Marcus & Millichap, said in a recent video. “If they do, they are rewriting the commercial real estate outlook for every property type.”