Quick Take: Sun Belt Markets See More Drastic Rent Increases Than Gateway Markets

Most major markets experienced robust rent growth starting in 2021 as the economy bounced back from the worst of the COVID-19 pandemic. Several of CONTI Capital’s target markets in the Sun Belt region shine particularly bright when it comes to year-over-year rent growth in 2Q 2022.

The map below demonstrates the range of rent growth in 2Q 2022 from the prior year. Most of the areas in green, which experienced the greatest rent increases, are in the southern U.S. Based on data from RealPage and analyzed by CONTI, the national average rent growth in that period was 14.5%.

Florida in particular experienced runaway rent growth. Of the markets illustrated above, West Palm Beach experienced the most rent growth at 26.2% year-over-year, followed by Fort Lauderdale at 25.9%. Orlando, which falls within CONTI’s Top 10 Markets for multifamily investment so far in 2022, hit a scorching 25% rent growth in that time. (Our Top 10 Markets consider many factors, such as demographics, regional labor market, and quality of life.) Another one of our Top 10 markets, Tampa, hit 24% rent growth.

The Dallas metro area, CONTI’s #1 Top Multifamily Market for mid-year 2022, hit 17.8% rent growth, with these markets also showing strong numbers:

  • Atlanta – 16.8%
  • Austin – 19.8%
  • Nashville – 20.7%
  • Charlotte – 17.9%
  • Raleigh – 19.9%.

Sun Belt states saw their economies recover from the pandemic faster than Gateway markets on average, as reflected in rent growth. While Los Angeles’ 14.3% rent growth is quite significant compared with historic averages, it’s below the national average. Chicago’s rent increased 13.0%. Both metros have seen a steady stream of outward migration. Washington, D.C., only saw rents go up 10.9%.

Rent is already moderating from its breakneck pace seen in 2021 and the earlier months of 2022. Yet it’s worth observing the differences in growth, because it illustrates just how great the demand is in the Sun Belt. Per our own data, Sun Belt metros are seeing a great deal of inward migration, and developers are having a hard time keeping up with housing needs. In fact, while the Dallas-Fort Worth metro had a lower vacancy rate in 2Q 2022 than its 10-year average, expected deliveries of apartment units will be at just about the same level as they’ve been historically, meaning demand is climbing measurably, according to our analysis of CoStar data.

We are now entering a new season in the market characterized by moderating growth and concern over rising interest rates. Despite approaching headwinds, we are reassured by multifamily’s strong fundamentals in the Sun Belt.