This month we’re examining COVID’s impact on the local real estate markets of Los Angeles and San Francisco, as well as the market we invest in: Phoenix, Arizona.
Many companies are leaving their office spaces empty for the remainder of the year and well into 2021. They’re still paying rent since commercial offices usually have multi-year leases. In some instances however, we’re seeing public companies like Pinterest pay $89M to cancel one of their leases in San Francisco.
Remote work will continue to be the reality for many of us—that are privileged enough to work from home—in the near future. And this is impacting the rental market as folks start to leave our cities of LA and SF. In fact, Zumper recently reported rents falling as much as 8% and 14% for our two cities respectively. We recently spoke to a few local property managers and discovered tenants were relocating, either temporarily or permanently, to more affordable towns within and outside of California. In contrast, Phoenix’s rental market actually continues to grow along with other less densely populated metros.
This tracks with what we’re personally seeing at our four apartment complexes. Our units continue to lease at our projected rents in the midst of this pandemic, and we even distributed the extra cash flow to investors across all four properties last quarter.
There’s still a lot of uncertainties ahead so we’ll see how things play out. Next month, we’ll detail how we picked Phoenix as our winning market 3 years ago.