Average rental prices for multifamily properties declined by one dollar in September, from $1,464 to $1,463, according to commercial real estate data firm Yardi Matrix’s September 2020 National Multifamily Report. The decrease continued a gradual decline that began in February, amounting to an $8 overall national rent decrease over an eight-month period.
Metros with lower rental prices — like the Inland Empire and Sacramento — have been the most resilient, increasing year over year by $35 and $37, respectively, according to the report.
However, metros commanding higher rent that were already falling out of favor — like San Jose and San Francisco — have experienced significant declines within the past year. In San Jose, overall rents dropped $205 from the previous year, while in San Francisco, rents dropped by $136 year over year.
“September YoY data continued with the trend that we have seen since the onset of the pandemic,” Yardi Matrix’s report reads. “Metros with the highest rents have suffered the most, while less expensive metros have fared better than expected.”
Austin and Boston also experienced sharp year-over-year declines, with rent dropping 2.9 percent between September 2019 and September 2020.
In 17 of the top 30 markets, month-over-month rent growth in September was negative, with San Jose seeing the greatest declines at -1.4 percent.
Yardi Matrix’s report revealed that across most metro areas, rents in the lifestyle asset class (renters by choice) have taken a greater hit compared to rents in the renter-by-necessity asset class (those who rent because they can’t afford to buy). The stark contrast is shown most significantly in Orlando, where lifestyle rents declined by 1.3 percent whereas renter-by-necessity rents increased 1.4 percent.
“The recent announcement of layoffs by Disney could further affect rents in Orlando in the coming months,” the report noted. With 67 percent of those layoffs being part-time workers, Orlando’s renter-by-necessity segment will likely be affected.
Likewise, although the unemployment rate improved during September to 7.9 percent, permanent job losses have continued to increase, and stands to impact future rents across the country. The number of permanent job losses increased by 345,000 to 3.8 million in September, meaning permanent job losses have increased by 2.5 million since February.
“Another looming threat to the job market is the corporate layoffs that are beginning to emerge,” the report adds.
Disney has laid off 28,000 workers, American Airlines recently furloughed 19,000 workers and United Airlines 13,000 workers, while MGM Resorts announced that 18,000 previously furloughed employees will become permanent layoffs.
“Unfortunately, although the economic recovery has begun, we are likely not out of the woods with permanent job losses and large corporate layoffs,” the report reads. “Eight months into the pandemic, with little aid in sight, companies are being forced to make tough staffing decisions.”