Elgin Area Chamber Of Commerce: Flight To Suburbs Could Weigh On Big-City Apartment Rents

Press release from the Elgin Area Chamber of Commerce:

December 22, 2021

Tier 1 markets include major cities such as Boston, Los Angeles, New York, San Francisco, Seattle and Washington, D.C.

By Lou Hirsh
CoStar News

The past year has seen smaller suburban cities surpass some of the nation’s largest metropolitan areas for apartment rent growth and overall demand in part because of the pandemic, and CoStar predicts the trend could extend well into 2022.

Favorable costs of living and doing business, coupled with strong employment growth, have driven people to move to smaller markets. That's a trend expected to weigh on multifamily rents in large U.S. cities grouped by CoStar analysts as Tier 1. Those markets include New York, Los Angeles, San Francisco, Seattle, Boston and Washington, D.C.

At the end of 2021’s third quarter, year-over-year multifamily rent growth in those top-tier cities stood at 7.2%, well below the national rate of 14.2%, CoStar data shows. The largest markets have also underperformed on employment growth, thanks in part to companies being lured to smaller cities with lower costs for running and expanding operations, putting downward pressure on apartment demand in the biggest cities.

Lower demand in the largest cities was reflected in a slower pace of lease-ups through the first three quarters of 2021. Those Tier 1 markets as a group saw available apartment inventory decline 1.4% while the rest of the nation saw a net decline in availability of 2.6%. As these patterns linger, CoStar analysts project that Tier 1 rent growth in the coming year will be about 6.5%, trailing the national rate of 7.5%.

Source: www.CoStar.com

This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author’s own.