The U.S. multifamily market held up better than expected during Q2 2020 based on the key market metrics of rent change and vacancy change.
The quarter-over-quarter rent change was -1.4%. Vacancy moved up a moderate 30 basis points.
Q2 statistics also revealed significant variation by geography. As a whole, Tier III (primary) markets outperformed both Tier II and Tier I markets, and Tier II markets outperformed Tier I markets as a whole.
Tier I markets, which includes both "gateway" markets and a handful of other leading metros, had the largest negative changes. All Tier I markets experienced a drop in average effective rent. All but two experienced increased vacancy. The two markets where vacancy fell (the Inland Empire and Long Island) are suburban markets and benefitted from outmigration from the urban core.
High rents, the ability to work from anywhere (for now), the temporary loss of urban amenities all contributed to Tier I's weaker performance. In addition to the Inland Empire and Long Island, other Tier II markets which performed better than the national average included Chicago and Washington, D.C.
Among Tier II markets, the best performers based on rent and vacancy change were Baltimore, Sacramento, Ft. Worth and Minneapolis. The majority of Tier II markets outperformed the U.S. average.
The notable exception was Honolulu, which was very hard hit economically by the decline of travel and tourism. Ten Tier III markets experienced improving rents and vacancy in Q2. Another 13 markets experienced either rent growth or a decline in vacancy. Richmond, Virginia (photo) held up the best.
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