Research - SEPTEMBER 3, 2019

Secondary multifamily markets continue to crack into the top 10

by Andrea Zander

Record absorption year-to-date catapulted Seattle-Tacoma (No. 1) to the top among apartment investment markets over the past six months as strong regional economic growth attracted more young heads of household with a high propensity to rent, according to IPAs 2019 Midyear Multifamily Investment Forecast.

The resulting robust demand should reaccelerate rent growth, which should then finish the year above the national average. Minneapolis-St. Paul (No. 2) dropped a notch because completions were forecasted above the metro’s historical average. New York City (No. 3) held steady as demand for rental units outpaced supply additions and the market maintained the lowest vacancy rate nationally due to the large gap between renting and owning. Decreased vacancy and above-average rent growth have propelled Boston (No. 5) and Tampa-St. Petersburg (No. 10) further up the rankings. In Boston, rising household formation spurred those excellent market conditions; while in Tampa-St. Petersburg, above-average employment growth and strong in-migration were at play. Orlando (No. 6) and Riverside-San Bernardino, Calif., (No. 7) kept their spots in the top 10 as tight vacancy rates pushed already above-average rent growth even higher. As the mercury surged, so, too, did Phoenix (No. 8), which rose four positions and broke into the top 10. Strong in-migration created vigorous demand and superior rent growth. The tight overall housing market should continue through year-end and keep rents sizzling well above the national average. Notably, Los Angeles (No. 9) slid five rungs due to weaker absorption and the resulting weak rent growth.

Markets outside of the top 10 making strong upward movement that should be on the watch list going forward include Fort Lauderdale, Fla., (No. 13), which advanced three spots as strong demand outstripped dwindling supply additions in a true barrier to entry market. Additionally, Raleigh, N.C., (No. 16) edged up two places with solid multifamily fundamentals driven by excellent employment and household growth. Columbus, Ohio, (No. 20) only moved up one notch over the past six months, but the second highest-ranking Midwest market has the legs to move up the index quickly. With a vacancy rate below the national average and moderating supply additions plus a solid expanding employment base, the metro sits in excellent position for further upward movement. West Palm Beach, Fla., (No. 26) rounds out the list as it jumped two places since the start of the year. Long considered the youngest to its bigger and more well-known South Florida siblings, West Palm Beach sits well positioned to reap further gains to its multifamily market as higher prices and lack of availability push households farther north up the South Florida coast.

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