Top 5 Midwestern Markets for Multifamily Development
- Jul 06, 2020
As the COVID-19 pandemic presents larger challenges for all real estate asset types, development in the Midwest’s multifamily sector continues to move forward. Although fewer new projects are breaking ground and construction timelines are being prolonged, more than 85,000 units—3.7 percent of existing inventory—were underway as of mid-June, Yardi Matrix data shows.
While this falls short of the national rate of 5.3 percent, development activity in the Midwest is fairly concentrated. A little more than 60 percent of all units underway are located in five markets. The table below highlights the top five metros for multifamily development in the region, with data provided by Yardi Matrix.
Detroit ranks fifth on our list, with nearly 5,000 units underway across 30 projects. While this only adds up to 2.3 percent of existing inventory, it does indicate increasing confidence in the metro over the past few years. Prior to the outbreak, Detroit’s growing Millennial population was boosting housing demand. However, fallout from the pandemic will likely lead to a tapering of new projects breaking ground, as Detroit was one of the first cities to experience an outbreak of cases.
The metro’s largest project is Moceri Cos.’ 613-unit Montclair at Partridge Creek at 17721 Montage in Clinton Township, some 20 miles north of downtown Detroit. PNC Bank is financing the project with $33.9 million. Though some of the property’s units were already delivered, the full development had been slated for completion in early 2022. However, construction was halted in April as a result of restrictions, so future delays are likely.
4. Columbus, Ohio
Columbus’ multifamily market has benefited in recent years from skyrocketing population growth, pegged at roughly double the national growth rate before the pandemic, with developers quick to bolster inventory. Since the start of 2017, more than 13,500 units had been delivered in Columbus. Although many projects are facing construction delays, upwards of 1,000 apartments have come online this year through May, with an estimated 6,027 more slated for completion by year’s end.
The city’s developments are concentrated in downtown Columbus, where 13 projects totaling 1,988 units are underway. The second, third and fourth phases of Lifestyle Communities’ LC RiverSouth, totaling 252 units, mark the largest project under construction in the city center. Backed by $16 million in construction financing from Wells Fargo, the community is slated for completion later this summer.
3. Kansas City, Mo.
Kansas City’s 7,755 units underway place it third on our list. The metro’s urban core has been the primary site for development, with nearly one-third of apartments underway in the downtown area. The market has seen fairly rapid development in recent years—nearly 12 percent of Kansas City’s multifamily inventory was constructed in the past five years.
Davis Development’s 380-unit Cyan Southcreek, located at 13220 Foster St. in Overland Park, Kan., is the metro’s largest project underway. Construction began in late 2018, with $37 million in financing from Wells Fargo. The development is currently preleasing, with delivery anticipated in September. Davis has two other nearby projects under construction, both less than 5 miles west of Cyan Southcreek in Olathe.
2. Twin Cities
With more than 5,400 units delivered in the past 12 months, Minneapolis-St. Paul continues to draw developers. The 14,308 units underway account for 6.8 percent of the market’s existing rental inventory, the highest share of any metro in the Midwest. More than 70 percent of projects are underway in the more central part of the market and the overwhelming majority of new developments are aimed at high-income renters.
The largest multifamily development in Twin Cities is McGough’s 402-unit The Fenley, located at 8051 33rd Ave. S. in Bloomington, within an Opportunity Zone. Northwestern Mutual provided the developer with $63 million in construction financing at the end of 2018, shortly before the project broke ground. Completion is slated for fall 2020.
Chicago’s 18,287 units underway place it at the top of our list. The Midwest’s largest city had long been considered a safe bet thanks to steady job growth and strong demand. However, the pandemic has begun exacting its toll on the multifamily landscape—in May, Chicago rents declined by 0.9 percent year-over-year, with lifestyle rents plummeting by 2.4 percent during the same time. That said, the vast majority of the metro’s developments continue to move forward.
Nearly 70 percent of the units underway are in Chicago’s urban areas. The largest project is the 800-unit first phase of Crescent Heights’ NEMA Chicago. The 76-story high-rise broke ground in early 2017 at 1210 S. Indiana Ave. in the Near South Side, with completion anticipated this summer. Bank OZK provided $203 million in construction financing.
Yardi Matrix covers all multifamily properties of 50-plus units in size across 133 markets in the United States. This ranking reflects properties that are under construction within that sample group.