The U.S. economy is now in a recession, unemployment numbers may backslide in July after sharp improvements in May and June, and COVID-19 cases are surging in the South and West. All of this points to challenging times for multifamily owners and operators, Yardi Matrix says. And things may get worse before they get better, according to a new special report.
Already, the impact is being felt in multifamily metrics, albeit less acutely than in the lodging and retail sectors. “After nearly a decade of solid growth, multifamily asking rents dropped 0.4% nationally in April and May, with twice as many metros seeing rents decline (71) as increase (35),” Yardi Matrix reports.
Metro areas that have fared best in rent growth since the pandemic began are mainly smaller markets, such as Portland, ME and Mobile, AL. Conversely, asking rents fell at least 0.6% in all primary markets during April and May, with the biggest decreases seen in Boston (-1.5%), Los Angeles (-1.4%) and San Francisco (-1.0%).
“Demand has weakened, and renters are increasingly looking for more inexpensive stock,” the report states. “Newer luxury units with the highest rents have fared worse than more moderately priced units.”
Lately, new units coming on line are taking longer to lease up. That has led prompting owners of the more expensive product to offer concessions or lower rents to attract tenants.
“Multifamily’s nearly decade-long run of healthy performance increases came to an abrupt and unexpected end this year,” said Jeff Adler, VP of Yardi Matrix. “Job losses have been particularly high among apartment renters, and simply collecting rents and maintaining occupancy is a new area of focus for owners and managers.”
As for the longer term, Yardi Matrix notes that there are more questions than answers. What’s ahead will be determined by a complicated combination of economic factors, public health metrics and renters’ feelings about the future.
If renters decide to eschew urban apartments for a more distanced standard of life in the suburbs or smaller cities, multifamily could be in for a prolonged pain period, says Yardi Matrix.