Apartment rents are rising in suburban markets across the U.S. as city dwellers look for bigger spaces in smaller towns.
Many of suburbia’s new tenants say that this year’s shift to a work-at-home model removed a longstanding barrier to living in these neighborhoods, namely a sometimes aggravating commute to a downtown city office building.
Suburban homes also offer more room and outdoor space for the dollar. These towns’ more-limited cultural and culinary attractions matter less when many city museums, shops, bars and restaurants have closed or are operating at partial capacity.
Even with the U.S. economy in recession, apartment rents in the suburban markets of Sacramento, Norfolk, Va., and the Inland Empire of Southern California rose 3.2% to 4.6% at the end of the third quarter compared with March, according to data firm CoStar Group Inc.
“They’re markets that are close enough to cities like San Francisco, Los Angeles and Washington, D.C., that allow people to be close enough to go into the office if they really needed to, but far enough to save,” said John Affleck, CoStar’s vice president in charge of market analytics.
Home sales in the suburbs are also strong; prices at the end of June were 3.3% higher than a year earlier, according to Zillow Group Inc.
At the same time, rents in central business districts in popular cities have been tumbling. San Francisco, where these rents are down 17% since the March peak, has been hardest hit, CoStar said. These district rents are down 9.2% in Boston and between 5% and 6% in New York, Los Angeles and Philadelphia.
Overall, central-business-district rents are falling about 1% a month, CoStar said.
The flight to suburbia reverses a trend toward urbanization that gained momentum in the decade before the pandemic. Hundreds of thousands of millennials and empty-nesters flocked to the activities and energy of cities, driving up rents and stoking hundreds of new apartment developments as more people chose to live near where they worked.
Now, many real-estate analysts suggest the shift to the suburbs could continue. Work from home remains widespread, and prices in the suburbs still look relatively cheap. Even with recent rent reductions in urban markets, upscale city apartments still command a premium of up to $2,000 a month over surrounding areas, according to landlords and brokers.
“In downtown Houston, rent is probably $2,600 to $2,700 per month for a two-bedroom apartment. If you go 10 miles to the west it’s $1,500,” said Ric Campo, chief executive of Houston-based Camden Property Trust, which owns 60,000 apartments in that city and 13 other regions.
Suburban rents are also rising for apartments that target the middle class paying less than $2,000 a month. Demand has increased as people worry about job security, but there’s been little new supply because most recent development has focused on higher end units and urban markets.
In the Boston area, interest has been strong for working class communities like Lawrence and Lowell, Mr. Affleck said. “They’ve been starved of new supply,” he said.
Many renters leaving the city for the suburbs are young couples that have been putting off getting married and having children and now want more space to start a family. Some landlords say they’re also seeing less doubling up during this recession than previous downturns because of concerns about contagion.
These renters are saying: “ ‘If I’m going to work from home, I want to be by myself,’ ” Mr. Campo said. “ ‘I don’t want to have a roommate and worry about their contacts.’ ”
Landlords point out that even before the pandemic, renters were starting to move out of higher cost markets like New York City and San Francisco to places like Austin and Denver, where they could get more space for their money.
“We’ve continued to see those patterns, but now they’re at a higher clip,” said Bob Faith, founder and chief executive of Greystar Real Estate Partners LLC in Charleston, S.C., the country’s largest multifamily landlord, with 693,000 units owned and managed globally.
Write to Peter Grant at firstname.lastname@example.org