What Does the 2020 US Rental Market Look Like?
Employers with plans to relocate employees either to US cities or between two different US cities should be sure to understand the 2020 US rental market dynamics. Each rental market is unique, and rents vary depending on a variety of factors. The number of units available for rent, business and economic growth, and even weather and climate patterns can impact rents. A regular review of the state of the 2020 US rental market can uncover opportunities for transferees to consider new assignments as different markets experience changes in rental affordability.
2020 US Rental Market on a National Basis
For the 2020 US rental market, CBRE Research identifies the following top 4 major metropolitan areas for continuing rental market demand:
- Atlanta, Georgia
- Austin, Texas
- Boston, Massachusetts
- Phoenix, Arizona
Specifically, multifamily rents in suburban locations will rise faster than those in central urban cores due to stronger demand within high-growth areas.
On a national basis, rents over the past year are 1.4 percent higher, less than the current 1.8% overall rate of inflation, and less than the average hourly earnings rate increase of 3.0 % over the past 12 months, according to an analysis prepared by online rental marketplace ApartmentList.com.
2020 US Rental Market Large Cities with Fastest Rising Rents
The fastest rising rents for the 2020 US rental market among large cities is the city of Mesa, Arizona, heading into 2020 after experiencing an increase of 5% over the past year. This rate of growth is more than three times the national rate of rent increases. Why is Mesa experiencing such a fast increase in rents?
According to the Rental Housing Journal, renters looking to move to the Phoenix metropolitan area are most likely to be searching from the city of Los Angeles, California. Residents of Los Angeles appear to be relocating to Arizona rather than commute from more affordable locations in California.
Inland Empire cities such as Moreno Valley, Riverside, and San Bernardino all offer more affordable housing options than Los Angeles. Many of these cities are highly desirable locations to live, work, and raise a family. However, commuting times to work from these cities are often lengthy and filled with delays. Over 53% of Moreno Valley residents experience commuting time over 30 minutes. Comparing Moreno Valley commute times to the US average shows that residents of Moreno Valley consistently face longer commuting times:
Commute Time Comparison Over 30 Minutes: Impacts the 2020 US Rental Market
|Moreno Valley, California||US Average|
|Commuting 30 to 34 minutes||17.5%||13.7%|
|Commuting 35 to 39 minutes||4.0%||2.9%|
|Commuting 40 to 44 minutes||5.0%||3.9%|
|Commuting 45 to 59 minutes||9.8%||8.1%|
|Commuting 60 to 89 minutes||9.7%||6.2%|
|Commuting more than 90 minutes||7.4%||2.7%|
What Makes Mesa, Arizona a Top Location for the 2020 US Rental Market?
Among large US cities, Mesa is uniquely positioned in the state of Arizona to capitalize on a number of factors. Proximity to Phoenix is key, with Mesa being only 15 miles to the east. Also, the city of Scottsdale, a major job hub and generator, is just 12 miles to the north. In 2019, Scottsdale ranked as the #1 best city to find a job according to CNBC Make It.
Mesa, Phoenix, Scottsdale, and many other cities in the metropolitan area are experiencing tremendous growth in jobs, impacting the 2020 US rental market. As noted by Arizona Governor Doug Ducey, the state of Arizona ranks #2 in the US for year-over-year job growth, according to the US Bureau of Labor Statistics. Sperling’s Best Places reports that Mesa has seen its job market increase by 3.3% over the past year. Additionally, future job growth in Mesa is projected to be 47.1%, much higher than the US average of 33.5%. Growth in jobs is a driving factor for rising rents in the 2020 US rental market.
Cost of Living Impact on 2020 US Rental Market
The cost of living in Mesa is just 4% higher than the average cost of living in the US. The average cost of most consumer items including groceries, health, utilities, and miscellaneous items is at or below the US average, so the 2020 US rental market reflects strong demand. Mesa’s cost of living compares favorably with many other nearby cities such as Chandler, Gilbert, Scottsdale, and Fountain Hills.
As the Phoenix metropolitan area’s jobs and economy continue to grow, more residents are drawn to Mesa. As a result, the 2020 US rental market analysis clearly shows demand for housing places upward pressure on rents.
The city of Mesa as well as private developers are actively pursuing several construction projects that will increase the number of rental units. The city is constructing a building downtown in an effort to attract Arizona State University classes by spring of 2022. According to investors, Mesa is seen as “next” in line for development, since the city has light rail service, and is centrally located to many other Valley destinations.
Following Mesa in the rising rent category for large cities are Henderson, Nevada (suburb of Las Vegas) at 4.3%, and Phoenix, Arizona at 3.9%, due to increasing job growth and continually expanding populations.
2020 US Rental Market Areas with Declining Rents
The largest decline in rents (2% or more) is occurring in these three US cities:
- Dearborn Heights, Michigan: -5.2%
- Pascagoula, Mississippi: -2.3%
- Bismarck, North Dakota: -2.0%
Dearborn Heights, Michigan is a suburb of Detroit. It ranks as #31 in the best places to raise a family in Wayne County, Michigan. The city is experiencing a weak job market and other quality of life issues that negatively impact its rental market.
Pascagoula, Mississippi has been experiencing a decline in population, matching a decline that has been persistent across the state of Mississippi for several years. By comparison, Bismarck, North Dakota, the state’s capital city, is experiencing a stronger and stable housing market that appears to be drawing residents toward single-family homes. As a result, the 2020 US rental market for Bismarck shows a trend away from apartments. Also, jobs are slightly declining in Bismarck so there is little upward pressure on rents.
GMS’ team of domestic relocation experts has helped thousands of our clients understand how to respond to changing rental market dynamics. Our team can help your company determine how to leverage the 2020 US rental market for transferees.
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