Insight #1: Throttle Up Your Sun Belt and Suburban Assets

By: Jay Parsons, Andrew Bowen and David Polewchak In 2020, apartment operators and asset managers largely focused on playing defense amidst a period of tremendous uncertainty. In some spots, defense remains the strategy for 2021. But leading owners and managers are identifying specific assets in their portfolios primed for growth in 2021. More often than not, they are finding opportunity in the Sun Belt generally and in the suburbs more specifically. Listen to the podcast on this topic. It's Not Just a “COVID Thing” It's been well documented that COVID-19 accelerated a decade-long shift favoring both the Sun Belt (where revenue performance consistently outpaced Coastal gateway metros) and the suburbs (which have benefited from strong demand and minimal new supply compared to Urban core submarkets). We’ll dive deeper into the challenges facing Urban and Coastal markets in our next article and, for now, focus on the good news: Most apartments in the Sun Belt suburbs ended 2020 with healthy fundamentals (including positive rent growth) and should be well positioned for solid revenue growth in 2021. The migration into the Sun Belt got heightened media focus in 2020, but the truth is that this pattern has been in place throughout the last cycle. This isn’t a “COVID thing.” We’ve been consistently bullish on Sun Belt and suburban markets since the tail end of the Great Financial Crisis, and those forecasts proved largely accurate. In Sun Belt suburbs, RealPage is forecasting rent growth of 1.3% in 2021 and 4.2% in 2022. One big reason the 2021 forecast isn’t more optimistic is the view that operators may still price too cautiously and tepidly – reverting back to manual control over the science of supply and demand. That means there’s opportunity for apartment operators and asset managers willing to throttle up proactively in 2021 – not just passively wait until all their comps shift gears first. Wa...