Secondary Markets Outperform Major Metros During Pandemic

Apartments in gateway cities are less popular with renters, while secondary markets see stable or improving rents, Chris Nebenzahl of Yardi tells GlobeSt.com

The apartment sector has been challenged regionally during the pandemic, with many metros facing significant decreases in rental rates and demand. Secondary markets, however, have been a bright spot for apartment owners. These markets have outperformed major metros, boasting stable and even improving rents, according to data from Yardi Matrix. To get more insight, we talked to Chris Nebenzahl, editorial director at Yardi Matrix.

Matrix data shows that secondary markets adjacent to major metros are benefitting most from this trend, and Midwestern markets are also performing well. Gateway markets like New York, Chicago, Washington D.C., San Francisco, Los Angeles and Boston top the list for rapid declines in rental rates and demand as well as rising vacancy rates.

Nebenzahl explains that outward migration is the primary factor driving the performance of secondary markets. In fact, many of the large metros have seen five years of outward migration over just six months. Renters are moving to more affordable cities with less density, as well as suburban markets.

Listen to the latest episode in the Multifamily Visions 2021 podcast series to get more insight into these apartment trends and data, and what this will mean for long-term apartment investments.