Job growth, which has been seen as a primary driver of apartment fundamentals, is no longer the gold standard for predicting apartment rent growth, according to a RealPage analysis. Cumulative employment gains typically have positively correlated with cumulative rent growth, meaning the more jobs a market added, the more landlords were able to raise rents in the regions, according to the analysis. But the correlation has changed over the past five years.
“There’s a bit of a positive trendline that indicates job growth translates to some rent growth, but the slope of that line is far less steep,” said RealPage. “And equally important, the relationship between the two variables isn’t much more than random.”
One explanation is that educated and high-earning employees are more likely to work remotely in the post-pandemic world. This makes a given market’s job gains irrelevant to where employees choose to live.
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In addition, job gains have been more heavily concentrated in lower and middle-earning sectors such as education, health services, government, leisure and hospitality. These tend to be lower-risk and more recession-proof jobs, but they also lack the earning power of sectors such as information, financial and professional services, said the report.
While it is less reliable as a predictor of apartment rent growth, job growth remains a generally strong indicator of overall economic health, said the analysis.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
