Rent Declines Are Accelerating as Pandemic Goes On

With every state starting to re-open in various ways, we are still seeing improvements in some metropolitan statistical areas (MSAs) in terms of traffic and leases, and mixed results in other areas.

During the week ending on May 27, for example, Atlanta, Austin and Orlando showed week-over-week (WoW) improvement in leases signed. Meanwhile, Phoenix, Houston and Dallas experienced double-digit traffic growth WoW.

These are positive trends in leading indicators, but they are offset with pretty steep declines in other markets. For instance, most MSAs in California recorded WoW declines in traffic and leasing, with Los Angeles experiencing double-digit dips in both metrics.

Whether this is a direct result of California still being under lockdown, it is too early to tell. However, data for the week ending on May 27 was mixed throughout the country. Some of the data points, especially traffic and leases, also could have been impacted by the holiday weekend, but in terms of net effective rents it is clear there is an accelerated decline.

With that background, here are some of the notable takeaways from the week ending on May 27:

  • Nationally, traffic and leases were down 4.2% and 5.6%, respectively, WoW.
    • But that decline could be in part because of the holiday: in looking at data from last year’s Memorial Day weekend, we saw a pretty decent WoW decline in these two metrics in 2019 as well. On a year-over-year basis, traffic and leases were down 31.8% and 12.3%.
  • Nationally, the occupancy rate and the leased percentage rates were slightly up (9 bps) and slightly down (39 bps), respectively, WoW. Both occupancy and leased percentage were down YoY, but the pace of YoY decline has slowed over the last three weeks.
  • In terms of individual MSAs, Atlanta is the first one to show YoY positive trends in both occupancy and leased percentage since the pandemic began.
  • Net effective rent results were mixed throughout the country, but the declines are accelerating across the country. San Francisco (-2.6%) and Los Angeles (-1.3%) experienced the steepest WoW drops.