Top Western Markets for Rent Growth
- Aug 25, 2021
The multifamily sector is reaching record levels of rent growth across the country. Asking rents were up 6.3 percent year-over-year through June and registered a $62—or 4.4 percent—increase in the second quarter of the year, according to Yardi Matrix data. In June alone, national rents expanded by a whopping $23, ballooning to an average of $1,482.
For the first time in two decades, Lifestyle rents grew faster than Renter-by-Necessity rates on a year-over-year basis. One of the main drivers behind the vigorous pace of growth is migration trends, especially in Southeast and Southwest markets, including Phoenix (17.0 percent), Inland Empire (15.1) and Las Vegas (14.6 percent).
Lower-cost metros were a magnet for the population exodus throughout the pandemic. Increased government aid and wage growth, coupled with higher personal savings, enabled renters to look toward higher-cost units. The list below highlights the top Western markets which registered the highest rent growth year-over-year through June, based on Yardi Matrix data.
|Market||YoY Rent Change – June 2021||Occupancy Rate||Units Under Construction|
|Salt Lake City||10.52%||96.88%||13,160|
In early 2021, Denver’s multifamily market was still gradually recovering, with local authorities implementing the city’s Rebuilding for an Inclusive and Sustainable Economy plan. Rent rates have started to bounce back, up 50 basis points on a trailing three-month basis in April.
In June, the average rent hit $1,680—the largest out of the Western markets featured here—registering an 8.1 percent increase year-over-year. In May, Denver recorded the third-biggest year-over-year growth in single-family rentals across all metros, hitting 13.5 percent.
In June, the city had 21,581 units under construction, with the bulk of the development pipeline expected to come online by the end of the year. The metro’s May unemployment rate stood at 5.9 percent—close to the national figure of 5.8 percent—and registered a significant 110-basis point decrease since January. The Denver-Aurora-Broomfield metro area saw a 0.9 percent population growth during 2020.
8. Salt Lake City
Utah has been ranked as the No.1 market for the strongest pace of job growth, according to Bankrate.com. In June, Salt Lake City had the lowest unemployment rate of the large metropolitan areas in the U.S., reaching 3.2 percent. The city has added 15,400 new jobs since the beginning of the year, while the annual population growth for 2020 hit 0.8 percent, double the national figure.
The June average rent in the metro stood at $1,345, marking a 10.5 percent increase from the same period last year. The multifamily occupancy rate was 96.9 percent, while the market saw 13,160 units under construction in June. In 2020, nearly 5,200 units were added to the city’s existing multifamily stock.
7. Albuquerque, N.M.
Albuquerque’s multifamily market rebounded in the second half of last year, fueled by steady demand and limited supply growth. As of June, rents climbed 13.6 percent on a year-over-year basis, hitting $1,063, the lowest average rent on this list, and tracing the national average of $1,482.
There was a significant difference between Lifestyle (18.6 percent) and Renter-by-Necessity (10.6 percent) rent growth for the market, with Lifestyle assets outperforming the latter by 8 percent year-over-year.
In 2020 the market recorded a 0.5 percent population growth, close to the U.S. average of 0.4 percent. According to preliminary Bureau of Labor Statistics data, New Mexico held the highest unemployment rate in June, reaching 7.9 percent and exceeding the national average by 2.1 percent, while Albuquerque bore a 7.0 percent rate in May. In the same month, the city had a total of 380,200 jobs, marking a 7.7 percent increase compared to the same period last year.
6. Reno, Nev.
Nevada is among the states with the highest unemployment rate in the country, with preliminary BLS data pointing towards 7.8 percent in June. Reno’s rate was significantly lower than the state average, reaching 4.9 percent in June. The city has added 6,600 new jobs since January, while the population grew by nearly 1 percent during 2020, more than double the national average.
By mid-2021, Reno’s average rent climbed to $1,467, marking a 14.3 percent increase year-over-year and slightly under the national average. Lifestyle rents stood at $1,793, while Renter-by-Necessity rates averaged $1,289. The June development pipeline encompassed 4,169 units under construction, along with an additional 4,402 planned units.
5. Colorado Springs, Colo.
Colorado Springs registered a 14.3 percent positive rent change year-over-year through June, with the average rent rising to $1,411 by mid-2021. With an occupation rate of 96.6 percent, the city had 3,593 units under construction in June, while 1533 units were delivered last year.
The city saw an impressive 210-basis-point drop in unemployment through the first half of the year, reaching 5.8 percent in June. Colorado ranked 35th on the preliminary U.S. state unemployment list for June. The rate clocked in at 6.2 percent.
Jobs were continuously added throughout 2021, with a total of 14,700 new positions recorded as of May. The city’s overall population saw a 0.9 percent increase during 2020, nearly double the national average of 0.4 percent.
4. Tucson, Ariz.
Tucson saw a 1.1 percent population increase in 2020 and added 5,600 new jobs in the first half of 2021. The unemployment rate dropped 40 basis points since January, shrinking to 6.7 percent in May, according to BLS data. Arizona has one of the highest unemployment rates in the country, reaching an average of 6.8 percent in June.
The market registered a 14.4 percent rent increase year-over-year, hitting $1,066 in mid-2021. Tucson had the biggest gap between Lifestyle ($1,617) and Renter-by-Necessity ($916) rents of the Western markets listed here, followed by Colorado Springs and Denver. By mid-2021, the occupancy rate stood at 96.6 percent and 1,765 units were under construction. Last year, a total of 707 new residential units came online within the market.
3. Las Vegas
Las Vegas’ economy took a hard hit during the pandemic, but in-migration from proximal high-density Californian metros have kept the multifamily market in shape, boasting a 14.6 percent rent growth year-over-year through June. The average rent in mid-2021 stood at $1,278, marking a $100 increase since January, while the occupancy rate hit 96.4 percent.
The metro’s employment market registered an 11 percent contraction last year, nearly double the national rate of 6.8 percent. Employment has risen steadily since the beginning of 2021, with the addition of nearly 50,000 new jobs during 2021. The unemployment rate dropped 90 basis points since January, shrinking to 8.9 percent in May, but still exceeding the national rate of 5.8 percent recorded that month.
The reopening of casinos and other entertainment venues will help the recovery of the essential leisure and hospitality sector, fueling a positive outlook. In the first quarter of the year, 588 units came online in the metro, while the market had 5,834 residential units in the works in June.
The metro has continued to inspire relocations, as the pandemic secured Phoenix’s status as the most popular destination for migration out of California’s gateway markets. The Phoenix-Mesa-Chandler metro area saw a 2.1 percent population gain in 2020.
The influx of new residents came mostly from higher-cost locations, driving longtime residents toward downsizing their living arrangements. The unemployment rate stood at 6.2 percent in May, down 40 basis points since January and exceeding the national average of 5.8 percent.
Phoenix rents rose by an average of $200 through the past 12 months, hitting $1,418 by mid-2021. On a month-over-month basis, the metro showed the strongest rent growth nationwide, along with Tampa. Both metros hit 2.5 percent. 2020 was the city’s second-best year this past decade in terms of transaction activity and stock expansion. By the end of June, 33,554 units were under construction, with the planned stock comprising 24,868 units.
1. Boise, Idaho
Topping the national list for rent growth, Boise had seen incredible economic prosperity before the pandemic dampened its soar. During 2020, the city’s population expanded by 2.7 percent, compared to the national average of 0.4 percent.
May unemployment rates came in at 2.9 percent, down 140 basis points since January, according to BLS data. One of the most rapidly rebounding markets in the country in terms of job gain, Boise has added 60,000 jobs since January 2021.
The city’s average rent was up 20.7 percent year-over-year through June. By mid-2021, there were 3,308 residential units under construction, marking a 25.5 percent increase year-over-year. With the occupancy rate reaching 98.1 percent, Boise has another 3,000 units in the planning phases.