Pandemic-Era Revenue Growth Slow in the Midwest

Since the start of the COVID-19 pandemic, apartment markets in the Midwest region saw revenues increase below the national average, at a pace that ties with the West for 3rd place. 

The pandemic has had a tremendous impact on the nation’s multifamily market. One way to look at performance is to study the change in revenue per occupied square foot, one of the metrics available in the RealPage Market Analytics lease transaction data set, which is comprised of more than 11 million individual apartment leases. This metric focuses on rent roll but does not include amenities or concessions, so it provides a nice apples-to-apples comparison of revenue performance across regions and markets.

When looking at revenue change by region since the beginning of the pandemic, the South saw revenues increase the most through 2Q22, surpassing the Northeast at the beginning of the year.  The Northeast led in revenue growth up until that point, coming out of the gates hot during 2020 and surpassing the three other national regions by a wide margin. 

Meanwhile, the slow-and-steady Midwest performed quite closely to the South during the early months of the pandemic, with revenue growth even surpassing the South region from mid-2020 to mid-2021.

The West was the only region to see a significant decline in revenue, which lasted from the start of the pandemic until around mid-2021. Indexed revenue change in the West eventually pulled up into positive territory in 3rd quarter 2021, averaging about 0.8%.  By comparison, 3Q21 revenue growth registered about 5.1% in the Northeast, 3.9% in the South, and 3.2% in the Midwest during that same July to September period. Still, the West regained significant ground since that inflection point, slightly outpacing the other three regions for revenue growth through 2nd quarter this year.

Overall, the Midwest region has seen about a 10% increase in revenue per occupied square foot since the onset of the pandemic, essentially tied with the West, with both trailing the national norm of 12%.

Turning to look at yearly revenue change by region, the Northeast again really outperformed throughout 2020 with a net gain of nearly eight cents per occupied square foot, while none of the other regions achieved any meaningful gains over that period. In fact, in the West region, there was a slight decline of about three cents per occupied square foot during the year.  

Revenue grew across each of the four regions during 2021, with the West regaining ground and seeing significant acceleration, especially during the second half of the year. Both the West and the South saw revenue increases of about ten cents per square foot during 2021, while growth in the Northeast tapered and performed more closely to the Midwest during the calendar year with each of those two regions achieving revenue growth of about five cents per square foot.

The first half of 2022 saw an uptick in revenue growth across the board.  Revenue per square foot in the Northeast increased eleven cents per foot during the first six months of the 2022, with the West region achieving a slight advantage ($0.12) and the South region ($0.09) following closely behind.  By comparison, the increase in the Midwest landed at about half that amount ($0.06). 

Overall, the Midwest region added about $0.12 of revenue per occupied square foot since the onset of the COVID-19 pandemic, trailing the other three regions and underperforming the national average ($0.18).  Still, the Midwest was able to avoid much of the volatility seen in other regions and held on to a solid lead over the US average until the end of 2021.

To gain further insight into Midwest region revenue growth, it’s important to examine the individual performance in some of the larger investment markets in the region. Looking at total accumulated revenue gain by year, St. Louis took the lead, with about 18 cents of additional net revenue per occupied square foot added since the beginning of the pandemic. St. Louis easily saw the largest gains during 2020 of about seven cents per occupied square foot, followed by subsequent gains of about six cents per square foot in both 2021 and the first half of 2022. 

In typical slow-and-steady Midwestern fashion, net revenue change in Columbus, Detroit, Indianapolis and Kansas City performed at a relatively similar level, with each market posting accumulated revenue about one cent apart from the previous one (ranging from $0.15 to $0.12, respectively).

Following moderate performance during 2020, revenue growth in Minneapolis saw a decline in 2021, with additional revenue of just two cents ($0.02) per occupied square foot added during the calendar year. Revenue change during the first half of 2022 landed roughly in line with 2021’s gain– underperforming all of the other major Midwest region markets except Chicago.

Chicago was certainly an outlier during the period, registering some of the steepest pandemic-era revenue declines among large markets during 2020.  Revenue improved in 2021, adding about four cents ($0.04) per square foot during the year.  Chicago saw performance skyrocket during the first half of 2022, adding about $0.12 of revenue per occupied square foot over just those six months alone.  Still, Chicago ranked last in net revenue gain with only seven cents ($0.07) gained compared to 1st quarter 2020.