As the Pandemic Persists, Renter Preferences Continue to Shift | Think Realty | A Real Estate of Mind
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As the Pandemic Persists, Renter Preferences Continue to Shift

What the future holds for the multifamily sector

The global COVID-19 pandemic accelerated multifamily trends that were already in place prior to the virus’s arrival – work from home (WFH), migration away from expensive gateway markets, and increasing investor interest in apartment properties.

Now, more than 18 months into the pandemic, it’s obvious that those trends have accelerated even more. Imagine they’re a runaway stagecoach in an old-timey Western film – there’s no stopping ’em now!

The next few years will bring even more change to the multifamily sector, creating both opportunities and challenges for investors and owners.

Re-thinking living situations

Earlier this summer, it seemed the U.S. was emerging from the pandemic. With vaccines readily available and infection rates declining, employers across the nation rolled out plans for workers to return to the office, either full-time or part-time, ending more than a year of WFH.

But the resurgence of the virus, driven by the highly contagious Delta variant, has delayed those plans. Many companies including Toyota have announced plans to allow employees to WFH indefinitely, while others – Lyft, for example – have decided to postpone re-openings until Spring 2022.

For more than 15 million households, home is an apartment. And of those renters, 41.5 percent work remotely, according to a 2020 survey by the National Multifamily Housing Council and Kingsley Associates.

Though some employees want to return to the office as soon as possible because they feel more productive in an office environment and miss co-worker camaraderie, far more employees desire the flexibility that WFH offers. In fact, nearly three in 10 employees (29 percent) would quit their job if they were told they were no longer allowed to work remotely, according to a recent survey by LiveCareer.

Anticipating several more months, if not years, of WFH, renters are rethinking their living situations. They’re evaluating where they want to live, how much space they require, and the amenities they desire.

Likewise, multifamily owners and investors are re-evaluating their portfolios as well, considering new markets and renovating their properties to accommodate WFH.

Moving to more affordable locales

WFH gives employees the opportunity to move to locales that are more affordable and offer a better quality of life. They’re no longer tied to a particular city or metro area simply because their employers are based there.

United Van Lines’ National Movers Study, conducted annually, examines the reasons behind Americans’ migration patterns. Data from March to October 2020 revealed the COVID-19 pandemic influenced moving decisions.

The top reasons associated with COVID-19 were concerns for personal and family health and wellbeing (60 percent); desires to be closer to family (59 percent); changes in employment status or work arrangement including the ability to work remotely (57 percent); and wanting a lifestyle change or improvement of quality of life (53 percent).

Throughout the pandemic, Americans have continued to abandon expensive gateway markets and large urban areas including New York City, Los Angeles, and San Francisco. These markets experienced significant population declines in 2020 and into 2021, according to the U.S. Census Bureau.

While relocations from these markets haven’t reached “exodus” level, non-gateway markets, particularly those in the country’s interior, have experienced significant population growth and in-migration. For example, smaller markets such as Austin, Denver, Nashville, Phoenix, Raleigh (N.C.), and Salt Lake City have seen their populations boom, as well as larger markets such as Atlanta and Dallas-Fort Worth.

Searching for more space

With Americans spending more time at home, larger apartments are increasingly appealing, particularly for those who WFH. Renters who need more space for kids and pets are gravitating to suburban, garden-style properties, which tend to be larger and more affordable (on a cost per square foot basis).

Multifamily owners and managers have noted increased demand for floorplans that accommodate WFH. Across the nation, one-bedroom units with studies or dens, for example, have waiting lists, while occupancy rates for two-bedroom units have increased, even for those with only one bathroom.

Suburban, garden-style properties are also appealing because of their surroundings. With many Americans afraid to socialize indoors, they’re looking for apartments that allow them to enjoy outdoor activities, whether its hiking through nearby greenbelts or enjoying the community’s pool.

Additionally, many owners are investing in amenities that accommodate renters who WFH. They’re renovating movie theaters and leasing offices to make space for workstations and Zoom rooms.

Insatiable appetite for multifamily assets

Throughout the pandemic, multifamily real estate has been relatively resilient, particularly when compared to other property types such as office, retail, and hospitality, according to CBRE’s 2021 Global Investor Intentions Survey.

It’s entirely accurate to say that investors have an insatiable appetite for U.S. multifamily assets. Multifamily is one of the top investments, with global investors ranking this sector as the second most preferred asset class behind industrial and logistics, according to CBRE. For 25 percent of investors, multifamily is the most preferred property type.

Last year, the multifamily sector experienced a smaller decrease in investment activity than most other mainstream asset types. The sector’s solid fundamentals – low vacancy rates and high rental collection rates – made it irresistible to private and institutional investors, both small and large.

Roughly $146 billion of multifamily assets traded hands in 2020, according to CBRE. Cap rates began to compress late last year and have since tightened to historically low levels. At the end of Q1 2021, cap rates had fallen below four percent.

CBRE’s data indicates that more than half of the major U.S. markets experienced very little deterioration in renter demand or rents during the COVID pandemic. However, a number of gateway and coastal metros saw rents fall significantly. For example, rent in San Francisco, San Jose and New York decreased 10 percent to 20 percent.

Fortunately, by midyear 2021, vacancy rates in nearly every market were falling and rents were rising. CBRE forecasts declining vacancy rates over the next 12 months, which will lead to solid rent growth of 5.6 percent. The firm anticipates that nearly all U.S. markets will exceed their pre-COVID rent levels by Q2 2022.

Over the next 12 to 18 months, multifamily investors will target Atlanta, Austin, Inland Empire (Southern California), Miami, Orlando, Phoenix, and Tampa. Investment in suburban multifamily assets will remain strong over that period, with cap rates further compressing across the nation.


Joe Fairless is the Co-founder of Ashcroft Capital which has over $1B in assets under management. Joe created the podcast, Best Real Estate Investing Advice Ever Show, which is the longest-running daily real estate podcast in the world and generates over 500,000 monthly downloads. He is also a proud Member of the Texas Tech Alumni Advisor Board for the College of Media and Communication, as well as being recognized as Outstanding Alumni at Texas Tech University, where he is a former Adjunct Professor. He is currently a Junior Achievement Board Member and Volunteer for the Cincinnati chapter and has been recognized by the Junior Achievement’s Free Enterprise Society. Joe volunteers at Crossroads Hospice and was recognized as Multifamily Investor of the Year by Think Realty Magazine.