In the course of the pandemic, several residential real estate markets have taken a hit. Take New York City, for example, which had to endure a mass exodus of renters as city dwellers fled early on in the pandemic in search of more open space.
At the same time, there's been a world of migration toward smaller cities, fueled largely by the remote work trend. And given that many employers are planning to uphold remote work setups beyond that pandemic, the shift toward smaller cities could continue.
Apartment rental prices, meanwhile, are rising to reflect moving patterns. And on a national level, in April, they reached $1,430 a month on average across the U.S., according to Yardi Matrix. That's a 2% increase from the average $1,401 rent in April 2020. It's also higher than the average $1,405 rent that applied in March 2020, before the impact of the pandemic shook the rental market.
In 19 out of the 50 largest metro areas across the country, average rents were 5% higher in April 2021 than they were in April of 2020, according to RealPage. Those markets that saw the most growth were largely concentrated in the Southwest, with cities like Phoenix and Las Vegas leading the pack.
By contrast, rents in hotspots like New York City and San Francisco continued to decline in April, though there's reason to believe that rents may have finally bottomed out.
Demand is likely to soar
At this point, coronavirus-related restrictions have largely been lifted, and cities are able to open up and make nightlife and other amenities available once more. That could, in turn, drive a surge in rental demand for small, midsize, and larger cities alike.
Furthermore, while many employers do intend to keep their remote work setups in place even once the pandemic is a thing of the past, many companies are now starting to call employees back into the office. That means the demand for rentals in larger cities should start to increase as workers do their part to either keep their jobs or avoid painful commutes.
All told, that gives landlords a prime opportunity to command top dollar for their listings. This especially applies to buildings with attractive amenities like on-site co-working spaces and high-speed internet -- features essential in an age when the return to offices may not happen on a full-time basis.
In fact, whereas residential landlords may have been forced to offer certain concessions, like free rent, earlier on in the pandemic to attract tenants, as the economy improves, landlords are more likely than not to gain the upper hand. That gives them more leeway to charge higher rents, especially in cities where inventory is limited.
Interestingly, the one area where rents haven't picked back up is luxury apartments. Those apartments are still seeing their share of vacancies. But that, too, could change as the economy continues to add jobs, work plans become more clear, and major cities become more appealing places to live.