Across the nation, the markets that were inducing the most anxiety for landlords in mid-2020 have all experienced an urban core rebound even stronger than most anticipated.
Arguably no apartment niche was hit harder throughout the pandemic than urban cores in gateway markets. Most urban core operators turned to rent cuts as early as 2nd quarter 2020 and continued to slash rents well into 2021, while residents fled, and occupancy dwindled.
Now, that seems to be in the rearview.
The urban core submarkets that experienced the largest comeback from annual effective rent cuts primarily span technology-heavy workforces in pricey, gateway markets. Seeing significant improvement in rent positioning over the last two years were the urban cores of Boston, San Francisco, Austin, Washington, DC, Chicago and Seattle.This rebound is especially noteworthy when considering that it began before many lifestyle amenities regained sure footing. Even before restaurants and bars reopened for good and downtown workers returned to offices, price premiums returned to urban cores.
In Boston, the urban core submarkets of Intown Boston, Cambridge/Somerville and Fenway/Brookline/Brighton all reported the deepest rent cuts in 4th quarter 2020 and 1st quarter 2021 but had rebounded to double-digit growth by the end of 2021.
A similar occurrence was seen in Chicago’s The Loop, Streeterville/River North and Lincoln Park/Lakeview submarkets. Each saw deep cuts in late 2020 turn quickly to growth between 8% (in Lincoln Park) and 15% (The Loop) a year later.
Outside these submarkets, another couple dozen urban cores rebounded rent change between 20% and 30% as of 4th quarter 2021, including downtowns in the South Florida trio of Miami, West Palm Beach and Fort Lauderdale as well as San Jose, Los Angeles, Philadelphia and Oakland.
For perspective, the U.S. hit the lowest point for annual effective rent cuts in 3rd quarter 2020, with declines of 1.4%. As of 4th quarter 2021, rent positioning had rebounded to growth of 13.8%.
Of the urban cores in the nation’s 50 largest apartment markets, there are no true laggards. In a couple, such as Downtown Minneapolis/University and Downtown/Midtown/Rivertown in Detroit, rent growth remains sluggish – but it’s growth nonetheless.
Given that lifestyle amenities continue to return to the nation’s downtowns as offices reopen and populations return, the future looks bright for these urban cores.