What’s Driving Record Growth in the Rental Market?

A record 700,000 apartments were leased last year, more than double the five-year average, while leases in Q1 2022 were double the number reported in Q1 2021, according to John Burns Real Estate Consulting. Fast-paced rent growth is the result of surging household formation, record-high occupancy, and income growth kickstarted by the 'Great Migration.'

Occupancy rose to 97.6% in the first quarter as roommates decoupled for more space and a substantial share of college graduates moved away from home. Household incomes also rose 10% year-over-year in April 2022, helping to keep rent-to-income ratios below 30% nationwide. Rent growth is expected to soften throughout the year, but will still remain above historical norms thanks to high demand and a boost in investment activity.

Apartments are a hot commodity among investors today because of the strong underlying fundamentals, and the desire for an inflation-hedged investment. There is more capital flowing into the sector than there are opportunities. More than $300 billion worth of apartment assets traded hands in 2021, a record amount by far. Many investors are taking advantage of fast-growing tertiary markets and value-add projects, where rents have plenty of room to grow.

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