Another Pandemic Winner: Apartment List Sees Valuation Double With Americans ‘In Motion’

Another Pandemic Winner: Apartment List Sees Valuation Double With Americans ‘In Motion’

“Our business is predicated on motion,” Apartment List CEO John Kobs told Bloomberg, in a recent interview. “And in 2020 we became profitable.”

I suppose that means we can count Apartment List among 2020’s “pandemic winners,” a collection of companies that includes the world’s most dominant tech titans, as well as anything that can be remotely described as a “stay-at-home” play.

I’ve repeatedly cited Apartment List data in these pages over the course of the last 10 months. The site provides valuable insight into trends, including and especially the de-urbanization narrative, which may or may not be overblown, depending on who you ask and what numbers you consult.

Kobs’s remarks to Bloomberg came as the company raised $50 million in its latest round. That apparently equates to a doubling of Apartment List’s valuation, which now sits in excess of $600 million.

The latest national rent report from the site, dated November 30, reveals a continuation of trends documented in these pages since April. The list of cities experiencing the largest decline in rents since the pandemic hit in March remained the same in the latest report, with one exception: Chicago broke into the top 10 (or “bottom” 10, depending on how you want to conceptualize things).

After the turmoil seen during the March-June period, the rental market “has moved in a fairly predictable fashion,” the site’s latest analysis reads.

However, despite the more “normal trajectory” observed in November, “fewer cities got cheaper, but those cities got cheaper faster,” the site remarked. On the surface, the national picture appears on par with 2019, but under the hood, things are far more nuanced.

“The nation’s smaller, more-affordable markets have absorbed most of the summer’s rent rebound, while larger, more-expensive markets have been saddled with unrelenting price drops,” Chris Salviati, Igor Popov, and Rob Warnock wrote.

Rents in San Francisco have collapsed by nearly a quarter, while Seattle, Boston, and New York have all witnessed drops of 18% or more during the pandemic (figure above).

This is clearly a byproduct of the virus and its impact on work arrangements. “These are all some of the most expensive markets in the country, and they all have a high share of their workforces employed by the sorts of companies that are quick to embrace remote work,” Salviati, Popov, and Warnock went on to say.

Additionally, the allure of big city life is diminished by lockdowns. “With many local amenities still closed, some of these workers may be questioning their choice of location,” the same report notes.

Yes, indeed. And that speaks to the de-urbanization trend. While de-urbanization has been a boon to the US housing market (which is arguably in a new bubble), the drawbacks are myriad.

If too many people abandon the country’s largest urban centers, entire downtown ecosystems in large cities may die as clientele disappear, possibly forever. As I’ve been keen to emphasize, many of those businesses operate on razor thin margins with almost no capital cushion, to speak of.

On the bright side, big cities’ loss has been midsized cities’ gain. The visual below illustrates the point.

Whether this is “real” evidence of de-urbanization is questionable, though. As Salviati, Popov, and Warnock wrote, “while we may be seeing the early signs of renters making housing choices independent of where their jobs are located, many of the cities with the fastest rent growth are still within commuting distance of larger job centers.” They note that Greensboro is “just” a 90 minute commute to Charlotte, while Chula Vista is just a San Diego suburb.

Whatever the case, renters quite clearly see some utility in fleeing America’s megacities, even if they exhibit signs of wanting to remain within “shouting distance,” so to speak. (But certainly not sneezing distance.)

The broader economic ramifications of this remain unclear. It’s not obvious, for example, that America needs a new housing bubble. And it’s far from clear that mass de-urbanization is desirable.

A successful vaccine rollout could change the dynamics, but as I write these lines, the UK is grappling with a new variant of COVID-19 that some scientists believe is as much as 70% more transmissible, underscoring the challenges ahead.

I suppose all’s well that ends with “motion” for Apartment List. As one investor in the company told Bloomberg this week, “rentals is the last remaining classified category not yet won by a modern-day startup.”

An IPO within the next two years is “realistic,” Kobs remarked.


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