2020 wasn't exactly the strongest year for rental demand. Millions of people saw their living situations uprooted as the coronavirus pandemic took hold. Many people fled cities in search of more space in the suburbs, while remote work and economic concerns put a lot of people's rental plans in flux.
But 2021 has been very different. At this point, a lot of companies have firmed up their remote-work and return-to-office policies, making it easier for employees to commit to apartment leases. And now that cities have reopened in full, more people are being drawn away from the suburbs and back to where the action is.
The U.S. economy has also improved significantly since the coronavirus crisis began. Despite the upheaval the delta variant caused over the summer, in August, the national unemployment rate reached its lowest level since the start of the pandemic. And with the job market opening back up, it's been easier for more people to get hired and shore up their finances to qualify for apartment leases.
All of this makes the case to jump on the multifamily investing bandwagon. And real estate investors who still aren't convinced need only look at recent rental trends to fuel a change of heart.
Rent prices are soaring
Rent prices rose substantially this summer as the demand for apartments took off. In August, the median rent for a one-bedroom apartment had increased 9.2% since 2020's second quarter, reports Zumper, while the median rent for a two-bedroom apartment rose 11%.
Furthermore, rent prices are increasing substantially in some of the cities that took the hardest hits during the pandemic -- notably, New York City and San Francisco. In fact, the median one-bedroom rent in New York City recently rose to $2,810, making it more expensive, on average, than San Francisco for the first time in years.
Time to get in on the action
There's a good chance rental demand will stay strong for the remainder of 2021 and carry through into 2022. And seeing as how tenants aren't balking at higher rent prices, now's a good time for investors to consider adding multifamily properties to their portfolios.
That doesn't just have to mean investing in actual buildings. Multifamily REITs (real estate investment trusts) had a strong second quarter, and the next few quarters will likely build on that success.
Furthermore, investors may want to specifically focus on multifamily properties in major metro areas that are in the process of staging pandemic-related comebacks. While New York City and San Francisco are amidst a solid revival, rent prices are also strong in metros like Washington, D.C.; San Jose, California; and Boston. Austin, Texas, has also seen a surge in rental demand, as more tech companies have begun taking up residence there.
Investors may even want to look to smaller cities as companies expand their office footprints to less-traveled locales. Oracle, for example, has plans to build out a massive campus in Nashville, Tennessee. Keeping an eye on corporate expansion plans could help multifamily investors pinpoint the next hot market -- and get in at just the right time.