Flats in Decrease-Value Areas Set to Thrive

Apartments in Lower-Cost Areas Set to Thrive

Given the increasing prevalence of remote working and the oversupply in urban markets, future trends seem to favor suburban housing.

Some households will move to lower cost areas in order to maintain similar quality of living or amenities for less money.

“We see some strengths in suburban housing,” says Joseph Biasi, CoStar Advisory Services advisor. "If this work-from-home trend continues over the long term, people will feel more comfortable moving to the suburbs."

That could mean more high earners are leaving town. "We'll see some of these higher-income households move into the suburbs and benefit from cheaper rents," says Biasi. "They also have a little more space because they are no longer in a city."

However, Biasi doesn't think this is just a passing trend. "We also believe that working from home will take a little longer," he says. "It's going to be a trend for the next few years and we're just starting to see it."

Many will prefer larger apartments and higher quality space due to social distancing. "Some people just don't want to be in closed, dense areas," says Biasi.

If people move into suburban housing, they will end up in some areas with little new supply.

"Prime suburbs didn't see that much of a supply pipeline," says Biasi. "So apartments in these areas will benefit from this overall lower-density flight that we're seeing."

These superordinate suburban properties are already developing well. "They actually outperform every other [apartment] type," says Juan Arias, Senior Consultant at CoStar Portfolio Strategy.

Without this new offer, there will be less high-quality apartments in the suburbs, according to Biasi. “Absorption and rent should increase in these properties. "We're not necessarily concerned about [performance] in quality suburban housing," he says.

However, there are still signs of concern in suburban housing. "In the inferior [residential] rooms, more tenants in the suburbs are at risk of financial instability," says Biasi. "Most of the economic impact of the virus is on lower income levels."

These are the people hardest hit by layoffs, job loss and loss of income. "Low-income workers do not feel financially stable," says Biasi. “You can see that in those who earn less than $ 75,000. The people who are likely to be in a three-star shared apartment or below feel less financially stable. So we would expect this to show up to some degree in these lower quality apartments. "

This is different from concerns in urban areas where supply and brain drain is the problem. "In urban areas, there is a risk of excess supply and lower demand in higher-quality areas as these high-income households move back to the suburbs," says Arias.



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