After record rent growth in 2021, what could the multifamily market do for an encore in 2022? Nearly halfway through the year, the market is exceeding expectations once again and CGI+ is in the hottest cities.
The average U.S. asking rent rose to $1,680 in May, up $70 year-to-date, a 13.9% year-over-year growth rate, according to Yardi Matrix. Rent growth this year has been far more robust than any year except 2021. Market performance not only has defied natural deceleration to the long-term average, but also has withstood much impact from the slowing economy. Persistently high inflation is prompting the Federal Reserve to raise interest rates to slow economic growth.
The economic volatility, however, barely seems to make a dent in multifamily demand. America has a long-term shortage of housing supply estimated at 2 million to 4 million units, and homeownership is growing out of reach for many buyers because of rising home prices and mortgage rates. Plus, the job market is strong, and household finances remain healthy.
Multifamily’s strong performance is led by markets in the Sunbelt where CGI+ typically invests and currently owns approximately 1,000 units. Metros in Florida topped Matrix’s growth rankings of the top 30 metros, which are led by Miami (up 24.2% year-over-year through May), Orlando (23.2%) and Tampa (21.6%). Smaller Florida markets are also seeing extraordinary growth, such as Southwest Florida Coast (28.3%) and Jacksonville (20.1%). Nearby Atlanta (15.2%) also recorded growth above the national average.
Demand, however, is pushing rents higher around the entire country. Coastal gateway metros, which lost households during the pandemic lockdowns in 2020, have rebounded strongly since the spring of 2021. New York City, Chicago, San Francisco and Los Angeles, all have seen occupancy rates increase by 1.2 percentage points or more year-over-year through April with resulting rent gains. Los Angeles, where we own or have under development nearly 2,000 units, has topped 12% year-over-year rent growth every month this year, the market’s highest sustained rate increases ever.