by Paul Fiorilla, Yardi matrix
First-quarter U.S. multifamily rent growth was surprisingly robust, with a sudden resurgence in luxury properties and in high-cost coastal markets, a sign that demand is on the rebound.
The strong early-year performance comes amid optimism about the economic recovery over the balance of the year. Consensus economic forecasts foresee 6-7% economic growth in 2021, buoyed by the $5 trillion-plus in relief aid passed by Congress in recent months. The relief packages contain upwards of $50 billion of renter aid and other aid targeted to apartment owners.
Nationally, rents averaged $1,407 in March, up $6 from the previous month, and 0.6% year-over-year, according to Yardi Matrix’s survey of 134 markets. Rents were up 0.8% for the first three months of 2021, which is the best first-quarter growth since 2018 and in line with the market’s seasonal performance through the recent economic upswing.
More encouragingly, March saw a turnaround in segments of the apartment market that have struggled since the start of the pandemic. Rents of high-end Lifestyle units, which are down 0.8% year-over-year, climbed by 0.4% in March (all data cited from Yardi Matrix). Performance of luxury units have lagged the renter-by-necessity segment (which is up 2.0% year-over-year) as demand has been concentrated in lower- and middle-tier assets.
The worst-performing metros also experienced a rebirth. San Jose (0.9%) and New York City (0.5%) both had strong gains in March after falling by double-digit percentages year-over-year. That could indicate that employment centers and coastal markets are regaining some mojo.
To be sure, the recovery remains nascent, and continued strong growth is no sure thing. Multifamily rent growth tends to be seasonal, with growth usually highest in the second quarter, so the next few months will be crucial to the recovery. Still, with vaccinations humming along and employment forecast to gradually return to peak levels over the next year, many signs are pointing toward a healthy recovery for apartments in 2021.