National CRE News In Your Inbox.

Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.

Sub Markets

Property Sectors


Apartment Fundamentals Rebound from Shaky First Half of 2020

National  + Weekender  | 

From the standpoint of investor demand, the apartment sector remains at or near the top of the class, rivaled only by industrial. Market-level fundamentals, though, point to a sector in recovery rather than a champ that simply shrugged off the economic battering from the pandemic.

A new report from Yardi Matrix says that apartment demand rebounded in the third quarter in many metros, “a good sign for the industry after a weak first half that was caused in large part by the fallout from COVID-19. The rebound helped to stabilize the multifamily market and prevented asking rents from declining as much as would have been expected considering the historic decline in economic performance in the second quarter.”

First-half absorption was strongest in Dallas, with net absorption of 7,700 units; Denver (4,700); and Atlanta (3,500)—all markets that have grown rapidly during the past decade, Yardi Matrix says. “Demand was down from cycle peaks but still positive.”

Metros with the most negative absorption included Los Angeles (-2,300), San Francisco (-2,100), Chicago (-2,100) and Miami (-750). Although absorption remained positive in the New York City region, it tapered considerably during the July-August period, while Phoenix and Charlotte actually saw more absorption from January through August than New York, despite being far smaller.

Absorption trends are driven by a host of factors, including the timing and extent of the shutdowns in each metro, according to Yardi Matrix. New York, New Jersey and California were among the first to order residents to shelter in place and are reopening in phases.

Conversely, metros in states such as Texas, Florida and Arizona were slow to implement precautions and have not closed businesses as thoroughly as states with gateway metros.

Looking at rent growth metrics, the study of 17 million apartment units in Yardi Matrix’s database demonstrates that rent growth so far this year has been closely tied to the overall expense of apartments by market. Metros with higher average rents generally saw negative growth, while rent growth in less expensive metros was modestly positive or flat.

“That is consistent with renters being more budget-conscious at a time of economic hardship,” the report states. “Higher-end units have had the largest decreases in rents and occupancy post-COVID-19.”

The recent rebound, Yardi Matrix says, “demonstrates the resilience in apartment demand, although it’s too soon to say how long it will last if the economy suffers a setback from a second wave of infections during the winter. Multifamily performance will decline if unemployment remains high and consumers feel uncertain about their prospects.”

Subscribe to Connect Weekender

For comments, questions or concerns, please contact Paul Bubny


Inside The Story

Download the reportConnect With Yardi Matrix

About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

  • ◦Economy