The luster of downtown luxury living has restored to its natural vibrance as investors take note of renter trends indicating an influx back to core markets across the nation. Investors spent over $32.2 billion in Q3 2021 to purchase high-rise and mid-rise apartment properties in order to take advantage of the steep price tags that units are going for in today’s market.
Despite work-from-home, hybrid schedules, and an uncertain return to office life, much of the amenities and ‘quality-of-life’ components of downtowns are starting to reopen, or become available again. Therefore, many residents who moved out of the dense core when the pandemic started are beginning to move back.
When the pandemic first struck, there was a job panic as employers weren’t sure if to accommodate remote work, or downsize, or simply cease operations. Renters didn’t have the income security to justify living in their expensive high-rise, while all of downtown’s amenities became widely unavailable.
According to CoStar apartment rents across the United States have increased 11.0% on average over 2021 in the top-14 downtown metros, and they are anticipated to keep growing with a projected 7.0% increase in 2022.
“Economists feel that apartments in downtown areas might become even stronger in the coming year. There’s an argument to be made that the peak has still yet to be realized in the coastal gateway urban areas in particular,” says Jay Parsons, deputy chief economist for RealPage. “Apartments in the nation’s urban core have recovered to pre-pandemic levels. Rents in the urban core today average about $2,090 per month at the end of 2021. That’s $90 above the February 2020 pre-pandemic level.”WealthManagement.com
Cities are starting to become noticeably healthier—whether or not vaccines are responsible—there is increased awareness on hygienic standards at public establishments. Therefore, with occupancy levels rebalancing, property managers are not struggling as hard to fill a space that was vacant throughout the pandemic.
“There’s been a lot of inflow back into urban neighborhoods and as the quality of life components that made those areas desirable begin to reemerge, we think that will help boost overall fundamentals,” says Parson.