GlobeSt. – Before the pandemic, people and economic growth were concentrated in global gateway cities. It was putting a strain on resources and creating crisis-level housing affordability challenges.
“We had all of the economic growth and population congregating in global gateway cities, and the cost of housing was so high. That was the big topic pre-COVID,” Jeff Adler, VP at Yardi Matrix, tells GlobeSt.com.
Of course, during the pandemic, that changed. No longer tethered to offices, people opted to move to new, smaller cities. Adler is speaking at the upcoming GlobeSt.com Apartments conference on October 26 and 27 on a panel called The Investment Landscape: How Multifamily is Driving Economic Recovery, where he will explain how accelerated migration out of urban markets during the pandemic is helping to fuel economic growth.
“We have a population that is on the move, and it is moving within metropolitan areas and across metropolitan areas,” he says. “Multifamily is really responding to that fundamental movement of people. At first, there was a contraction of demand. Young Americans that were still employed stopped forming households, but now we have seen a release of the creation of households over the last year.”
The movement patterns were actually so abrupt and immediate that they actually overwhelmed many cities. “Excess supply that was in the Southern and Western states was finally absorbed and then overwhelmed. Rents are up 20% or 30% from pre-COVID levels in those cities,” says Adler.
Early in the pandemic, some experts believed that these migration trends would shift economic centers from the urban core to the suburbs, and some even predicted the death of big cities altogether. That theory quickly fell flat. This year, the apartment sector most urban markets have already recovered. “We had a snap back in some of the urban core markets,” says Adler. “With the exception of Downtown Washington DC and San Francisco, rents have recovered, and occupancies are pretty close.” And, even in the case of Washington DC and San Francisco, rents have vastly improved.
For multifamily investors, this trend is creating opportunities in new markets. “Multifamily is in a unique position,” says Adler. “People are working more from home, and the expectation is that people most of the time will not work in a centralized office. There is movement of people desiring more space and desiring more space and looking for a lower cost of living. Multifamily is responding to the movement of people and the redefinition of work.”