In the second half of 2020 and the first half of 2021, roughly 363,000 rentals were delivered. Marcus & Millichap says this was the largest completion volume over a four-quarter stretch in at least two decades.
The deliveries weren’t uniform throughout the nation. In fact, almost one-third of US deliveries were in seven metros, each of which gained more than 10,000 units.
Two metros exceeded the 20,000-unit threshold. Dallas-Fort Worth led the way, adding 27,700 apartments. Houston was next with 20,200 new apartments. Another Texas market, Austin, also added more than 10,000 units. Other Sunbelt markets, including Atlanta, Phoenix and Charlotte, also added markets at a fast clip.
Large markets outside of the Sunbelt, including New York City and Washington, D.C, also led the way in deliveries since June 2020. “Elevated completions in more stressed gateway markets like these could prolong local recoveries,” according to Marcus & Millichap.
As deliveries increased in certain markets, people continued to leave dense cities for less populated areas. The national vacancy rate in central business districts peaked at 6.3% at the end of last year but has since settled to 5.2% in June 2021, according to Marcus & Millichap. While that rate is down ten basis points year over year, it is still 100 basis points higher than it was in 2019.
Markets with solid in-migration, such as Austin and Orlando, had the most significant annual CBD vacancy declines. On the other end of the spectrum, Cleveland, Philadelphia, Indianapolis and Columbus posted year-over-year CBD vacancy jumps larger than 200 basis points.
In the second quarter, the suburban vacancy rate contracted 70 basis points annually to 3.8%. West Palm Beach and Riverside-San Bernardino, metros that drew remote workers, posted annual vacancy abatements of larger than 200 basis points, which paced the market. Not surprisingly, technology hubs like San Jose and San Francisco posted vacancy increases as some workers relocated.
“Conditions remain bifurcated throughout the nation, but the vacancy margin between urban and suburban is tapering,” the report said. “Demand for urban apartments will continue to improve as employees return to offices and young adults, who often prefer the downtown lifestyle, find jobs in these settings.”
A recent report from Yardi Matrix also shows that residents who decamped from urban markets during the pandemic are now returning in droves.
New York, Seattle, Chicago and Washington, D.C. are rebounding. In addition, recent graduates who moved in with their parents during the pandemic are beginning to form households in the urban cores.