May 5, 2021

JF2437: What Markets Have Fully Recovered From The COVID-19 Recession? | Syndication School with Theo Hicks

In today’s Syndication School episode, Theo Hicks shares his thoughts, insights, and analysis of the Yardi Matrix’s Bulletin for April 2021 about the markets that have fully recovered from the pandemic’s recession.

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Theo Hicks: Hello, Best Ever listeners, and welcome back to another episode of The syndication School Series, a free resource focused on the how-to’s of apartment syndication. As always, I’m your host, Theo Hicks.

Today we are going to talk about the 14 markets that have, as of this moment, fully recovered from the COVID-19 induced recession. So we’re going to be pulling this information from Yardi Matrix; each month they post a bulletin and this month, April, focused on the rent and occupancy year-over-year changes for the country’s biggest markets.

And I highly recommend that you stay up to date on these various market reports. A lot of them are released on an annual basis, so they’ll do an annual review and then they’ll do a forecast of the coming year. Those are usually pretty detailed, and so are very long. I know, IRR does one, Marcus & Millichap does one, I’m sure Yardi Matrix does one. If you just google annual multifamily report for 2021, you’ll find them.

There’s also a lot that get released quarterly, some of them get released least twice a year, some are monthly… I know Yardi Matrix and the Fannie Mae, I believe, release monthly reports. And these are for the national level, they’re market-specific… These are really the best ways to stay up to date on what’s going on… Because a lot of these companies have their own research divisions that are able to access data a lot faster than you can by looking at the census, for example. It is just a one-stop shop; is a lot easier, as opposed to having to go everywhere to pull the information, but Yardi Matrix does a really good job. And we’re going to talk about their April 2021 bulletin today.

So in that bulletin, they said, “Roughly one out of every 14 multifamily properties in the US has seen occupancy rates drop by 5% or more over the last 12 months.”

So one in 14 is approximately 7.3% of multifamily properties that were surveyed by Yardi Matrix experienced a drop of 5% or more in occupancy. And a smaller percentage, about one in 50, so 1.8%, experienced a 10% or more drop in the last 12 months, so essentially from the onset of the coronavirus pandemic.

Obviously, this number is heavily skewed to the large urban areas. For example, New York City led the way where 32.6%. So essentially one in three properties experienced a 5% or more decrease in occupancy. And then one in 10 or 9.8%, experienced a 10% or more drop in occupancy. So that’s huge, going from 95% to 85%, and that’s just the average in a sense. Some places dropped more than 10%, more than 5%. So that’s kind of the downside, but we’re here to focus on the good news, which are the markets that have a positive year-over-year occupancy growth and year-over-year rent growth.

So overall, when we look at the national multifamily occupancy, it’s down 0.2% year-over-year. So nationally, the occupancy rate has yet to recover. And because of these large urban areas, obviously have having a large number of properties relative to other areas, and they’re so far off from the pre-pandemic levels, Yardi Matrix is predicting that the national occupancy will not get back to pre-pandemic levels until at least Q2 of 2024. So three years for the entire nation to recover.

Break: [00:05:22] to [00:07:23]

Theo Hicks: Now, on the whole, the national rents have already recovered; that’s really good news. So national rents are now point 0.6% greater today than they were pre-pandemic. There were a few episodes talking about some of the best markets for rent and growth in 2020. Obviously, some markets outperformed the national average; other ones, rents dropped by a lot. But on average now, rents have returned to pre-pandemic levels. 0.6% rent growth is not three to five-plus percent we’ve seen the past, but still better than the negative number we’ve experienced in 2020.

Now, in the Yardi Matrix bulletin, they listed off all of the top markets, and then they referenced whether or not they recovered or not. So what was the year-over-year occupancy rate growth, what was the year-over-year rent growth, or rent change and occupancy change? And then if it had not recovered yet, then they had their prediction of when it would recover.

On that list, there’s 14 metros that had both occupancy levels and rent levels above pre-pandemic levels. It is either because they’ve fully recovered, or they weren’t impacted and they always had a positive occupancy growth. I don’t really take that into account. All I did is, okay, what are the markets that are seeing higher rents and higher occupancy today than the same time last year right at the onset of the pandemic?

So these aren’t in any order. These are just the 14 markets, and I’ll mention the changes in occupancy and rents as well. Number one is Raleigh, North Carolina. So this has been pretty frequently on the top 10, top-whatever market lists. What we’ve been doing at Syndication School is Raleigh, North Carolina. The occupancy change year-over-year is 0.1%; rent change, year-over-year is 0.5%. Nothing crazy, but Raleigh’s still a pretty big market, so that’s good to see.

Portland is another big market with the occupancy change year-over-year of 0.3%, and then a rent change of 1.7% year-over-year. Another market that is very frequently on the top list is Phoenix, Arizona. So Phoenix, Arizona, has an occupancy change of 0.4%, but the rent change is very significant of 6.9%. So rents have grown by 7% in Phoenix, Arizona, since the onset of the pandemic.

Number four is Denver, Colorado. Occupancy change year-over-year is close to zero, but is positive; it’s point zero something percent, and then rent change year-over-year is 0.4%. So it’s not significant, but still is recovered.

Number five, we have Indianapolis, Indiana. Occupancy change year-over-year 0.6%, rent change year-over-year is very high at 3.9%. This one kind of surprised me – number six is Philadelphia. Philadelphia is a pretty big city. It’s the North East area, around New York City, and New York City has done horribly, so maybe that’s why Philadelphia is doing a little bit better. But we’ve got a year over a year of a 0.2% for occupancy, and then a rent change of 3.4% year-over-year.

Another place in the Northeast is Baltimore, Maryland, with the occupancy year-over-year change of 0.9% and a rent change year-over-year of 3.8%.

Next, we have Orange County and then Sacramento; those are both on the west coast. These are also frequently on these top 10 market lists. So Orange County, 0.3% occupancy change, and then rent change is 1%. Sacramento 1.1% occupancy and then 7.3% for rent. So one of the highest on the list so far.

Number 10, Las Vegas. It’s basically been on every single top list since the onset  of the pandemic. We’ve got an occupancy year-over-year change of 1.4%, and then a rent change year-over-year of 6.1%.

Atlanta, Georgia, which I’m not necessarily sure — I don’t think this has been on a lot of top 10 lists, but if it does have of the large markets a high year-over-year change for rents of  4.7%. So fourth-highest on this list, I think. And an occupancy changed year-over-year of 1.1%. Number 12 is Tampa, Florida, consistently on these top 10 lists. Occupancy year-over-year change of 0.9%, the rent change of 5%.

Break: [00:11:40] to [00:12:21]

Theo Hicks: We’ve got Charlotte, North Carolina; that’s another place, North Carolina, in addition to Raleigh, with an occupancy change year-over-year of 0.5% and then a rent change year-over-year of 2.7%.

And then lastly, Inland Empire, which I believe is the highest rent growth year-over-year on this list of 8.3%. And then an occupancy change year-over-year of 2.2%.

So from my research, and the show’s number four talking about the rent changes, occupancy changes because of the pandemic, what you see is the really big popular San Francisco, New York areas are doing really bad, and then the market around those are doing really well. So people are basically leaving those massive urban areas and moving out to maybe smaller urban cities or to the suburb areas like Orange County, and then the Inland Empire, San Francisco, for example, or maybe even moving all out into Las Vegas, Nevada, for example.

So a couple of other markets on this list to note that I didn’t mention because technically, they haven’t fully recovered as of the report at least, but Dallas, Texas is one of these markets, so their rents have fully recovered. And then the occupancy is almost fully recovered. They projected it recovering in Q2 of this year… So basically at some point during the next couple of months. So in a sense, Dallas has already fully recovered. And Houston also kind of falls in the same boat; rents and occupancy are still below pre-pandemic levels, but they’re expected to fully recover by the end of 2021.

And then these next cities are kind of ones that aren’t such good news. So it’s the Twin Cities, St. Paul, Minneapolis in Minnesota; Nashville, Tennessee, and then Kansas City – rents have fully recovered, but occupancy is not expected to fully recover for at least a few years. So Yardi Matrix doesn’t think that the occupancy in the Twin Cities will recover for at least five-plus years, so 2026 or later. For Nashville, it’s Q4 of 2023, so it’s about two and a half years. And then for Kansas City, they have Q4 of 2024, so about three and a half years.

So I guess partially bad news, partially good news. And then the big major markets; New York, San Jose, San Francisco, Los Angeles, Chicago and Orlando – occupancy is not expected to fully recover there for more than five years, if ever. So their estimation is basically saying like, “Okay, we don’t know when occupancy is going to fully recover in these markets.”

So again, the reason why I like talking about this timely, current event type of top market list is because it’s good to see which markets have been in demand over the past year or so, because that’s an indication that there’s a sense they did really well during this recession. They’re pretty strong markets, and they’re going to be able to get ahead of that demand by either doubling down in those markets or transitioning and diversifying into those markets.

So really quickly, just a summary of that list again, we’ve got Raleigh, North Carolina; Portland, Oregon; Phoenix, Arizona; Denver, Colorado; Indianapolis, Philadelphia, Baltimore; Orange County, California; Sacramento, Las Vegas, Atlanta, Tampa; Charlotte, North Carolina, and Inland Empire, California, all have a positive year-over-year occupancy change and a positive year-over-year rent change.

Dallas basically has the exact same thing, it’ll be recovered at some point in the next couple of months. Houston will be fully recovered by the end of the year. And then Twin Cities, Nashville, Kansas City rents are fully recovered, but occupancy is a little lagging behind. And then New York, San Jose, San Francisco, Los Angeles, Chicago, Orlando, occupancy might not ever recover in those areas, or at least not for the next five years or so.

So again, this is from the Yardi Matrix, April 2021 bulletin. If you just go to Yardi Matrix and check out their publications, you can download that full paper. Make sure, again, that you go to these places every month. These episodes seem to be doing very well, so we might be doing more of these market-related episodes in the future. I know people really like the ones we’ve done in the past… But just in case, again, make sure you bookmark all these different commercial real estate reports, because they’re jam-packed with great information that you really can’t get anywhere else on your own.

So that will conclude this episode, The 14 Markets that have Fully Recovered From the COVID-19 Induced Recession. Make sure you check out our other Syndication School episodes at the Thank you for listening, have a Best Ever day and we’ll talk to you tomorrow.

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