New York, San Francisco Rents Plunge in Shift to Cheaper Cities

Apartment rents are plunging in sexy, high-cost cities from New York to San Francisco. Now, places that were considered boring before the pandemic are suddenly in high demand.

The biggest increase in the third quarter was in California’s Inland Empire -- Riverside and San Bernardino counties -- where effective asking rents for apartments jumped 4.4%, thanks to the boom in distribution warehouses outside Los Angeles, according to data from RealPage Inc.

That was followed by Sacramento, California; Virginia Beach, Virginia; Greensboro, North Carolina; and Memphis, Tennessee. By contrast, San Francisco rents fell 11% and New York’s dropped 8.5%.

Big international cities were hit hardest in part because a bigger share of their workers are in tourism, entertainment, restaurants and other businesses most hurt by Covid-19 lockdowns. The slow-and-steady markets, on the other hand, are especially attractive now that so many Americans can work remotely. Many Silicon Valley workers have shifted to cheaper locations, including Sacramento, where rents are surging.

“If you don’t have very many hospitality workers, your economy may have done reasonably well,” said Greg Willett, chief economist at RealPage. “They’re bread and butter, usually slow-growth markets. And slow growth looks good relative to what we see everywhere else.”

New York lost the most renters in the third quarter. Nearly 12,000 more moved out than moved in, the worst performance in the U.S., according to RealPage. By comparison, New York had a net inflow of 10,000 renters in the third quarter of 2019.