Inner city apartment rents are rising again and available units are becoming harder to find as more people head back to work.
According to a report in the Wall Street Journal this week, median rents for apartments in urban centers rose by more than 10% in the last month, compared to one year ago. Citing data from Apartment List, it said almost every major U.S. metro area saw rents increase from where they were a year ago.
The Journal said the trend is being driven by a huge number of young professionals who’re returning to cities as physical offices reopen for business.
Rents for apartments in city centers nosedived at the start of the COVID-19 pandemic, as people, desperate for space after spending weeks locked inside, sought to move to quieter areas with more space. Cities such as New York and San Francisco saw apartment rents fall by double-digits for example as thousands fled.
Young professionals tend to live in inner city luxury apartments for the convenience, as they don’t want to spend hours traveling to work each day. But when there’s no need to physically be at work, those apartments, which are often somewhat cramped compared to suburban homes, quickly lose their appeal.
Now though people are prizing convenience again as they return to work, and housing providers are no longer offering incentives such as a month of free rent as they’re no longer struggling to attract tenants, the Journal said.
Analysts say new household formation is also driving demand. “You’ve had young professionals who were living with parents being called back to their employer, or who feel more secure and now they’re going to rent,” said Robert W. Baird & Co. analyst Amanda Sweitzer.
UDR Inc., a large corporate owner of apartments, recently reported an all-time high occupancy rate of 97.5% at its buildings. It said tenants aged 25 to 29 and 30 to 34 now make up a much larger share of its client base than they did before the pandemic.
Some of the increased rental demand came from would-be home buyers who have been priced out of the market for buying a new home. Prices for new and existing homes have surged over the last year to a record high median of $363,300 in June. That, combined with an inventory shortage, has forced many people to rent as they cannot presently afford to buy a home.