Seattle takes top spot for multifamily markets in 2018

The top two markets in 2017, Los Angeles and Seattle, have traded places in 2018, according to Marcus & Millichap’s 2018 Multifamily North American Investment Forecast report.

Driven by robust employment in the tech sector and soaring home prices that keep rental demand ahead of elevated deliveries, Seattle-Tacoma ranks first on the chart. The metro outperforms last year’s leader, Los Angeles, which slid one spot to number two.

Sacramento’s robust rent growth and low vacancy pushed the market up 12 positions in the ranking (8), the largest increase in the Index. Other double-digit movers were Orlando (17) and Detroit (28), which each climbed 10 places.

On a national level, steady job creation, above-trend household formation and elevated single-family home prices have converged to counterbalance the addition of 1.37 million apartments over the last five years, at least on a macro level, easing concerns of overdevelopment.

In the coming year, rising development costs, tighter construction financing and mounting caution levels will curb the pace of new additions from the 380,000 units delivered in 2017 to approximately 335,000 apartments this year, according to the report. Although the pace of completions will moderate in 2018, additions will still likely outpace absorption.

In addition, nationally, class A vacancy rates advanced to 6.3 percent in 2017 and will continue their climb to the 6.8 percent range over the next year, reports Marcus & Millichap. Vacancy rates for class B and C assets will rise less significantly in 2018, pushing to 5 percent and 4.7 percent, respectively. Average rent growth will taper to 3.1 percent in 2018 as concessions become more prevalent, particularly in class A properties.

The full report can be found here.