10 Markets with the Lowest Expected Supply Growth

The multifamily industry has experienced a recent boom. But with a risk of oversaturation in some markets, development is slowing and deliveries are expected to peak.

By Meeghan Fuhr

The multifamily industry has experienced a development boom as demand increased with changes in employment, population and housing trends. Now, with a risk of oversaturation in some markets, development is slowing and deliveries are expected to peak. Recently, we ranked the top 10 markets that had the highest expected supply growth this year. Below is a list of the 10 markets that have the least expected growth supply in 2017 based on data compiled by Yardi Matrix.


10. Sacramento, Calif.

Demand for rental units in Sacramento, Calif., has skyrocketed as affordability issues have forced residents to flee San Francisco and Oakland. Sacramento is experiencing growth on all fronts, and employment was up 3.5 percent in 2016. With increased demand and no respective growth in supply, rents in Sacramento are soaring, with a 7.3 percent increase from May 2016 to May 2017. However, investor interest is picking up, with almost 14,000 units in the planning and prospective phases of development.

9. Central Valley, Calif.

The Central Valley area in California is still predominantly an agricultural region; however, there has been progress toward diversification, with Fresno developing a tech presence and Bakersfield becoming a center for arts, culture and sports. Employment growth of 3.5 percent in 2016 drove demand as rents increased 5.2 percent from May 2016 to May 2017 while occupancy reached 97.2 percent. As the economy continues to diversify away from agriculture, development activity will likely increase.

8. Lansing-Ann Arbor, Mich.

The strong university presence in the Lansing-Ann Arbor area in Michigan drives the market’s economy. The auto and insurance industries have a notable presence as well, with several General Motors facilities and a number of national insurance companies across the market. Employment was up 2.6 percent last year, driving demand as 1,157 units were delivered in 2016. With annual rent growth of 2.9 percent and occupancy of 96.1 percent as of May 2017, the market is maintaining healthy growth across the board.

7. Little Rock, Ark.

Little Rock, Ark., is the state capital and located along the Arkansas River, and as such, government and trade, transportation and utilities are major industries within the market. Employment increased slightly by 1.1 percent last year, and as of May 2017, annual rent growth was 1.1 percent while occupancy fell to 93.5 percent. With decelerating rent growth and falling occupancy, it appears that Little Rock isn’t an appealing market for new development and that current supply is sufficient to meet demand.

6. Tucson, Ariz.

Coined the “Optics Valley,” Tucson, Ariz., has a high concentration of optics companies drawn to the market for the University of Arizona’s research capacity. Rents increased 3.3 percent from May 2016 to May 2017 as occupancy fell to 94.0 percent over the same period. With limited inventory expected to be delivered this year and only a small number of units in the planning and prospective phases of development, it appears that current supply and demand levels may be relatively balanced.

5. Central Coast, Calif.

Given its location along the oceanfront, the Central Coast in California generates a lot of activity through tourism and trade/transportation. Several technology companies are located near the University of California Santa Barbara, though employment growth was only 0.9 percent last year. The market had annual rent growth of 5.0 percent and occupancy of 97.2 percent as of May 2017, and with limited new supply expected this year, multifamily fundamentals will likely remain stable.

4. Memphis, Tenn.

Home to FedEx headquarters, Memphis, Tenn., is a transportation hub located along the Mississippi River with access to numerous freight railroads and interstate highways. The addition of roughly 609 units last year had relatively no impact on occupancy, which hovered around 94.4 percent as of May 2017. Although limited new supply will be delivered this year, over 6,000 units are in the planning and prospective phases of development, which may put pressure on rents and occupancy in the long-run.

3. Colorado Springs, Colo.

Colorado Springs is strongly tied to its military base, but tech firms and start-ups have been diversifying the economy. With a more affordable cost of living than nearby Denver, Colorado Springs has seen an inflow of new residents, and employment was up 2.9 percent last year. Increased demand with no respective increase in supply sent rents soaring 9.3 percent from May 2016 to May 2017. However, with over 4,000 units in the planning and prospective pipeline, it appears developers may be catching on to the growth prospects in the market.  

2. South Bend, Ind.

Manufacturing still remains a major industry in South Bend, Ind., however there have been efforts to bring more tech companies to the market to spur economic growth, and employment increased 2.3 percent in 2016. Rents jumped 4.3 percent from May 2016 to May 2017, and occupancy remained fairly stable around 94.8 percent. Though employment and rents increased over the year, recent occupancy levels indicate that no substantial increase to supply is necessary to meet demand in the market.  

1. Albuquerque, N.M.

Although Albuquerque is the hub of New Mexico’s tech market, the metro is experiencing a period of slowdown as Intel, one of the market’s major employers, continues to lay off employees. However, Facebook’s new data center is expected to be complete in 2018, which could revamp the market. Rents increased 1.8 percent over the 12-month period ending May 2017 while occupancy remained relatively stable around 94.9 percent, and it appears supply and demand remain fairly balanced in the market.

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