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Since the early 2000s, more people began favoring walkable urban environments over traditional suburbia. Developers responded with thousands of 5-over-1s—the classic model of five residential floors over one floor of retail—that define emerging neighborhoods like Seattle’s South Lake Union or Charlotte’s South End. 

Surprisingly, this shift to urban living did not cause CBD rent growth to outpace the sleepier suburbs. In fact, suburban and urban rents largely followed a similar trajectory from 2008 to 2015, when suburban growth started to pull ahead. While many high-earning millennials choose city dwelling, most young adults still favor the suburbs, creating a deep pool of residential demand. Also, all the new 5-over-1s meant that urban landlords had to compete on price for new residents. 

More recently, suburban multifamily construction has picked up, stalling rent growth and likely setting up rents to fall in some submarkets. Nevertheless, suburban demand will be buoyed by the high mortgage rates that have chilled the for-sale market and likely will cause more young people to rent for longer, even after they marry and start families. This will make suburban rentals a compelling option for many households.