Rents expected to rise as COVID19 pandemic eases

The era of pandemic rent declines appears to be over.

After falling through much of the COVID19 crisis as people relocated to suburbs or moved in with relatives, rents in big cities including Los Angeles, San Francisco and New York are now on the rise. And experts say that prices are likely to keep swinging upward.

“Landlords are really eager to charge more rather than charge less,” said Rob Warnock, research associate with rental website Apartment List, whose data show the median rent in Los Angeles is up 3.6% from the bottom. He said he expects the rise to continue, taking until the end of summer for prices in the city to hit February 2020 — or prepandemic — levels.

In Los Angeles, the median rent for a vacant apartment hit a low of $1,717 in January and has risen ever since, according to data from Apartment List. Other data sources also show a steady increase since the beginning of the year, which analysts attributed to job growth and returning demand for city life as the pandemic ebbs and the economy reopens.

Rents fell last year as people moved out of apartments in big cities, because they wanted more space and bought a house or because they lost their jobs and decided to move in with family.

At the same time, the typical inflow of people coming for new jobs and college fell.

Landlords said they were forced to cut rents to fill an increasing number of vacant apartments.

How much and how fast? As of Monday, the apartment vacancy rate in Los Angeles County had declined to 5.8% after hitting a high of 6.2% in November, according to real estate data provider CoStar.

Chuck Eberly, who manages roughly 3,000 apartments in the L.A. area, sees the fresh demand firsthand. He said that vacancies are dropping throughout Eberly Co.’s portfolio and that rents are up 5% to 10% from the pandemic bottom.

“We are getting a lot of lookers at our properties,” he said. “I think a lot of it is more security as to where they think the economy is going and where they think the pandemic is going.”

Rising rents, however, don’t mean the market has returned to its ubercompetitive days before 2020.

Warnock said rents are rising faster than normal at the moment, but part of the increase probably is due to typical seasonal upswings during the spring and summer.

Eberly said the rents on the company’s properties are still about 15% to 20% lower than before the pandemic, and prospective tenants are negotiating by pointing to competitors with cheaper listings. A rebounding economy probably will continue to drive those increases, analysts said, as California marks what officials have described as a full reopening Tuesday, with most pandemic business restrictions coming to an end.

Greg Willett, chief economist at real estate firm RealPage, said there’s broad agreement that rents will rise going forward, but there’s a debate over how quickly.

“There are some folks who think that happens pretty much overnight as everyone is vaccinated and in theory starts to go back into the office,” he said. “We are more of a slow grind outlook.”

Ryan Patap, director of market analytics at CoStar, said rent growth has been stronger in suburban places, because people moving during the pandemic increasingly sought out more space at an affordable price.