Going Solo: The Rise of Single-Tenant Rentals
In recent years, there has been a noticeable surge of individuals choosing to purchase or lease properties independently, a trend that has not gone unnoticed by commercial real estate (CRE) professionals in the multifamily sector. Although solid data supporting this shift may have been elusive, a recent report from Yardi’s RentCafe has provided valuable insights into the development of the solo tenant phenomenon and its potential trajectory. Here are the key findings:
Rise in Solo Rentals: Analyzing the period from 2016 to 2021, the report reveals a significant increase of 1 million people (or 6.7%) in the number of solo renters in the United States. Notably, this demographic emerged as the fastest-growing renter group over the five-year span, experiencing a notable acceleration in 2020. Simultaneously, the count of individuals residing with family in rented apartments decreased from 71.3 million to 68.1 million during the same period.
Metro-Specific Metrics: The trend exhibited considerable variations across different metropolitan areas. Leading in solo rental growth were cities such as Salt Lake City (with a remarkable 24.9% increase), followed by McAllen (24.2%) and Austin (23.9%). RentCafe attributes the appeal of these areas to the flourishing economic development observed in recent years. For instance, Salt Lake City has witnessed a surge in tech and healthcare sectors, attracting new residents seeking a vibrant job market and a different lifestyle pace. Similarly, Austin’s tech sector expansion has made it an enticing destination for industry professionals.
Conversely, metros like San Jose, San Francisco, and Los Angeles reported a lower proportion of solo renters, as the cost of living in these areas necessitated a significantly higher income to afford independent living.
Demographic Trends: The report delves into interesting demographic trends, particularly regarding the age groups of solo renters. The majority of individuals living alone were identified as Baby Boomers or Millennials, accounting for 61.9% collectively, while only 3.9% of Gen Z renters chose solo living.
Supply and Demand Dynamics: The growing preference for solo living may bode well for the apartment sector, especially considering the substantial influx of supply into the US markets. This trend, coupled with evidence of flattening apartment rent growth, as noted by Redfin Economics Research Lead Chen Zhao, suggests that the market is poised for a potential slowdown in the near-to-medium term. While the construction of new apartments continues, there are signs of a gradual decrease, which could eventually contribute to stabilizing rent prices.
For multifamily real estate professionals, staying abreast of evolving trends, such as the rise in solo rentals, is crucial. This awareness provides a strategic advantage in crafting marketing approaches tailored to target the right prospective clients in a dynamic and evolving real estate landscape.