Throughout most of 2021, apartment leasing and rents surged as pent-up demand caused by the pandemic exploded onto the market. However, the rental rate growth has slowed considerably, signaling that the market may have stabilized. The national rent index from Apartment List showed rent growth of 0.8% from September to October. This was the slowest rate of growth since February 2021. In any other year, a growth rate of 0.8% is a typical rate for the peak summer months.
Since January, multifamily rents have grown 16.4% nationally. The national median multifamily rent is now $1,312 per month. Researchers estimate that this is $107 higher than if the rental rates had grown in line with 2018 and 2019. 22 of the largest 100 cities saw a decline in rent, which is well below typical. In October 2019, rents declined in 76 cities across the US.
“Nationally, and in nearly all individual cities across the country, rent growth in 2021 has exceeded average growth rates from pre-pandemic years,” said Apartment List’s Chris Salvati. “This month however, that record setting growth is finally showing signs of a meaningful slowdown. Although growth is still exceeding pre-pandemic trends, our vacancy index ticked up for a second straight month and month-over-month rent growth came in at less than one-third of its July peak.”
The slowing rental rate growth may not be all bad. Seasonal slowdowns are common across the country as the peak of demand is usually in the spring and summer. The multifamily market remains extremely tight for renters. There is a limited supply of new apartments being added to cities across the country. The supply chain slow downs will also slow new development as material costs continue to climb.
Multifamily real estate remains one of the most desirable commercial real estate asset classes. It will likely remain that way for 2022 and beyond.