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Demand For Downtown Apartments Has Recovered

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Even though the Covid-19 pandemic stubbornly refuses to conclude, apartment investors are disbursing money faster than ever downtown. The percentage of vacant apartments in these downtown submarkets is now lower than pre-pandemic. Investors spent $32.2 billion to buy high-rise and mid-rise apartment properties in Q3 2021, even as the Delta variant of the coronavirus spread across the US. The data was a vast improvement from the same period in 2020 when investors spent just $8.9 billion. It’s also considerably more than investors spent even in healthier pre-pandemic days. According to RCA, in Q3 2019, investors spent $17.3 billion. “Occupancy levels have rebalanced from the pandemic,” says Parsons. At the end of 2021, the percentage of apartments occupied in urban core markets was 96.4 percent, according to RealPage. That’s up from under 95% in February 2020 and 92.5% at the lowest point of the downturn. “There’s been a lot of inflow back into urban neighborhoods and as the quality of life components that made those areas desirable to begin with reemerge, we think that will help boost overall fundamentals,” says Jay Parsons, deputy chief economist for RealPage. Urban core submarkets in places like Phoenix and Tampa hardly saw any impact over the past two years, and rents are 20% above the pre-pandemic mark. However, few markets have recovered fully, including the San Francisco Bay area, Minneapolis, and pockets of Washington, D.C. Meanwhile, “Manhattan (the entire island) stands out as its asking rent growth has lagged the 14 downtown markets in terms of asking rent growth in 2021,” says CoStar’s Lybik.