During the third quarter of 2021, the U.S. multifamily housing market experienced record-high absorption rates. Nationally, 536,311 net units have been absorbed year-to-date, according to Berkadia’s 3Q21 National Report Card. Leasing activity was on pace to exceed at the beginning of the year of 320,212 net units in all of 2021.
California Leads the Way
Nearly 68,300 net units were absorbed across 19 western markets during the third quarter. Major coastal Californian markets have had high net absorption from July to September 2021. Los Angeles County leads the western metros with more than 17,700 net units absorbed during the third quarter. San Francisco-Oakland, San Diego, and Orange County experienced similarly high demand during 3Q21.
High absorption during 3Q21 in the gateway metros of San Francisco-Oakland and Los Angeles is in part a result of the return to in-person work for many offices and job creation. According to the U.S. Bureau of Labor Statistics, approximately 72,500 net jobs have been added to Los Angeles County and San Francisco-Oakland metros through the third quarter of 2021. After the pandemic sparked a mass exodus from California, the addition of these jobs have helped Los Angeles and San Francisco recover from the negative effects on the market due to the pandemic, and exceed 2021 projections.
Secondary Markets Are Strong in the West
Outside of California, apartment operations in other western metros such as Denver and Las Vegas experienced high demand. In the third quarter, Denver had 6,470 net units absorbed. Meanwhile, the Las Vegas metro’s third quarter absorptions totaled 2,597 units.
Similar to Los Angeles and San Francisco, Las Vegas and Denver payrolls increased in 3Q21. Though residents are drawn to the healthy economy and job opportunities in Denver and Las Vegas, the metros offer a more affordable cost of living compared to bigger gateway West Coast cities. The average third quarter rent between Seattle-Tacoma, San Francisco-Oakland, San Jose, Los Angeles County, Orange County, and San Diego is $2,430 which is 28.7% more expensive than Denver’s average rent and 43.8% higher than Las Vegas’s average rent in 3Q21.
To learn more about absorption rates across the U.S., visit Berkadia Research page.