Urban Core Apartments Catch Up With Suburban Counterparts

Markets for apartments in urban cores are catching up with their suburban competitors in terms of both occupancy and rent growth, according to a new report from RealPage Market Analytics.

That marks a welcome change from the period during and shortly after the Covid pandemic when residents fled downtown for the suburbs and remote work. “Arguably, no apartment niche was hit harder than downtowns, especially in gateway markets,” the report said. The exodus forced landlords in urban cores to cut rents. The trend was in evidence by 2Q 2020 and remained in place for at least another year, the report said.

By mid-2021, there was a 750-bps difference between urban and suburban apartment rents. Landlords in urban cores were trimming rents by more than 5% on an annual basis, while suburban rent growth was over 2%. Occupancy in urban cores also fell near 300 bps on average below suburban markets.

By March 2024, the average annual change in rent in urban cores was -0.7%, while rents in suburban submarkets remained stable, as they have been since August 2023. This discrepancy of 70bps marked a return to a more normal pattern when the margin between the two groups was small, like before the pandemic. In the pre-pandemic period, “Urban cores posted, on average, an occupancy rate of 93.3% in March, compared to a rate of 94% in suburban submarkets,” the report noted. Urban core occupancy typically fell less than 100 bps below suburban occupancy. Likewise, annual effective rent change in urban cores underperformed suburban counterparts by about as much,” the report said.

“Four years later, urban core submarkets are once again performing approximately in line with pre-pandemic patterns.”