4 Categories of Apartment Rent Forecasts for 2021
Here are 4 categories of apartment rent forecasts for 2021 put together by John Burns Real Estate Consulting for 127 metro-area apartment markets in their latest newsletter.
“We maintain a bullish outlook for demand, with some key differences by market. With such a wide variation across the markets, good timing could lead to great opportunities,” write Jeff Kottmeier, Lesley Deutch, and Ken Perlman, partially in a weather forecast-style presentation.
“To help you ‘weather’ (pun intended) market shifts and assess market ‘forecasts,’ we segmented the trends into four categories
“We see a positive long-term future for apartments, just on varying timelines depending on their unique locations and attributes. But in a year where the for-sale market dominated the headlines, let’s not forget that one-third of the population resides in rental housing, and the long-term future for that is bright,” they write.
Here are what they write about apartment rent forecasts the four categories:
- Boomburbs (Suburban Growth):Suburban-growth markets benefited tremendously from migration out of the cities during the pandemic. Their low cost of living, good quality of life, and relative affordability drew residents from across the country seeking space. We expect some (not all) of these renters to return to apartments closer to their jobs after a COVID-19 “all clear.” We are forecasting a small decline in rents (in the one percent to two percent range) in 2021 for these markets due to some outmigration (assuming COVID-19 is all but over by the fall), but a return to rental growth in 2022. Suburban markets have captured most of the positive headlines in 2020, attracting investment and development capital. We are still very bullish on locations close to jobs, retail, and entertainment, and properties that provide an “affordable alternative” to urban apartments.
- 2021/2022 outlook: Mostly sunny in 2021
- 40 percent of markets fall into this category.
- Examples: Austin, Tampa, Charleston, Indianapolis, Myrtle Beach, Nashville, Phoenix
- Braintowns (College Towns):These markets depend on students and were heavily affected in 2020 (five percent to 10 percent rent declines). We see demand and rents continuing to soften in the first half of 2021 in the apartments rents forecast with an improvement this fall, as more students return to campus. Properties located close to campus will benefit. More students will likely desire to live off-campus, supporting demand for apartments.
- 2021/2022 outlook: Partly sunny in 2021
- Five percent of markets fall into this category.
- Examples: Ann Arbor, Boulder, Charlottesville, VA, Madison.
- Downtowns (Urban): The pandemic and the resulting ability to work from home softened demand in the urban markets. Most markets have already experienced sizable rent declines (five percent to 15 percent) in 2020. We expect more declines in 2021, but to a lesser degree, as tenants slowly move back to the cities and some people return to work in their offices. Rent growth will be slower to recover in metros and submarkets that have elevated levels of new apartment construction and/or are under prolonged COVID-19 restrictions. Urban markets are not dead. With investors and capital moving away from urban centers, some properties may be undervalued. This could be a great time to consider investing in properties and developing closer to the urban core.
- 2021/2022 outlook: Partly sunny by 2022
- Five percent of markets fall into this category.
- Examples: Boston, DC, NYC, Miami, San Francisco
- Dependables (Sizeable Unemployment):These are the markets to watch as eviction moratoriums expire. We expect declining rents in 2021 to early 2022 and potentially rising vacancy rates. Construction levels, however, are relatively low in many of these markets, mitigating some of our concerns. These are markets to consider for longer-term investment or development.
- 2021/2022 outlook: Cloudy (with a chance of clearing)
- 50 percent of markets fall into this category.
- Examples: Minneapolis, Detroit, Kansas City, Philadelphia, Reno
Source: rentalhousingjournal.com
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