Cincinnati—2013 was a good year for the Cincinnati apartment market, as the city experienced an increase in demand thanks to improving employment, income growth and a swelling millennial population. According to Marcus & Millichap, 600 apartments were delivered last year, vacancies dropped to 4.5 percent—the lowest year-end level in years—and average rents were fast approaching $800 per month. And the commercial real estate brokerage firm expects Cincinnati’s apartment market to perform the same this year.
Forbes recently reported that Cincinnati is the third most affordable city in the United States. Although the median price for a new home in the area was set at around $133,000, the rental market was still the top performer last year. And apartment rents are expected to continue to increase in 2014, for the fifth consecutive year. All of this is thanks to the growing population of young professionals. Cincinnati’s 20- to 34-year-old population, with its live-work-play lifestyle, has sustained rental demand in urban areas, or in areas with all-inclusive urban developments, such as Rookwood or Oakley Station.
Urban development will also help improve apartment demand, which Marcus & Millichap sees as an important factor in reviving the local economy. The Banks, on the riverfront, is Cincinnati’s star project. It is the largest mixed-use development in the city, with residential, office, hotel and retail components. The first phase of the project created 3,600 permanent jobs and delivered a parking facility, 300 apartments and 96,000 square feet of retail space. Last year, developers started work on its second phase. It is scheduled for completion in the fall of 2015, and will bring 305 apartments and 21,000 square feet of retail space. The Cincinnati Streetcar is another important project. It will cover about four miles around the city’s downtown, connecting major employment centers. Most importantly, it has the potential to spur new development, revitalizing the city’s core.
In its National Apartment Report for 2014, Marcus & Millichap reports that 800 units will be delivered in Cincinnati this year, 200 more than in 2013. Some of them are scheduled for completion in the following months. (Read about them here, here and here.) Although apartment vacancy will rise to 4.8 percent, it will still be lower than in 2009, and rents are also expected to rise to $804 per month.
The number of apartment buyers will also increase this year. There is plenty of capital, and local banks are once again financing out-of-state, small private investors looking to purchase mid- to lower-tier assets. As demand is currently greater than supply, prices have nowhere to go but up.
Charts courtesy of Marcus & Millichap Real Estate Investment Services.