As several metros continue to bear the brunt of renters moving out, multifamily rents remained flat for the third straight month in October with secondary and tertiary markets outperforming major metros.
Figures from Yardi Matrix show that the national average rent in October dipped 0.6% year-over-year. The stunted growth was likely due to an “ever-increasing divergence” between outperforming and underperforming markets, according to Yardi’s latest National Multifamily Report.
“With each passing month, outmigration from large gateway markets to secondary and tertiary tech hubs is amplifying,” the report stated. “At this point, the apparent winners are markets in close proximity to large gateways but with significantly lower costs of living.”
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Renters are leaving pricey coastal metros for neighboring Inland Empire (6.0%), Sacramento (5.0%), Las Vegas (3.9%) and Phoenix (3.8%) markets – which all ranked high in Yardi’s top 30 market rankings for annual rent growth.
“The average rent in the Inland Empire ($1,669) is 23% less than the average rent in Los Angeles, and the average rent in Sacramento ($1,609) is 34% less than the average rent in San Francisco. As many workers, especially those in creative and knowledge-based industries, enjoy increased flexibility to work remotely, many individuals are weighing the costs and limitations of gateway markets versus the benefits of smaller cities and are choosing to relocate,” the report said.
It was a similar story for tertiary markets, with Boise (8.1%), Huntsville (6.8%) and Portland, Maine (6.5%) leading all markets in rent growth.
Meanwhile, New York (-10.0%), San Francisco (-8.2%), Washington, D.C. (-3.7%), Boston (-3.1%), Chicago (-2.9%) and Los Angeles (-2.8%) all fell into negative territory.
“Demand remains strong, as gateway residents are not only moving to nearby secondary metros but also relocating to other tech hubs in the Sun Belt and Southwest. Primary markets will not suffer forever, but their recovery will depend on how much newly relocated individuals enjoy their adopted homes and cities and whether they choose to stay,” stated the report.