Top 5 Multifamily Markets for Rent Growth
- Nov 29, 2019
Nationwide, the average overall rent rose by 3.2 percent year-over-year through October, to $1,476, according to Yardi Matrix data. Meanwhile, the markets on this list have seen their rents go up by at least 310 basis points and by as much as 510 basis points above the national average.
However, these are considerably lower growth rates compared to our previous ranking. Secondary and tertiary markets continue to dominate the list, while only two large metros made the cut.
5. Portland, Maine
Bolstered by steady demographic and employment gains, the metro’s multifamily market is in expansion mode. Employers added 2,200 jobs year-over-year through September, with the bulk in the manufacturing and leisure and hospitality sectors. And with a 1.9 percent unemployment rate in September, Portland, Maine, ranked among the tightest job markets in the country.
As a result, development activity accelerated in recent years, after practically stagnating between 2010 and 2015. Rent growth followed suit, with a 6.3 percent uptick year-over-year through October, well above the 3.2 percent national rate. The average rent stood at $1,393—5.6 percent lower than the national average. As of October, developers were working on five projects totaling 641 units, including URS Capital Partners’ Clark’s Pond in the metro’s South Portland submarket. At build-out, the 256-apartment development will be the biggest community to come online in the submarket in more than two decades.
4. Las Vegas
An ongoing attempt to diversify the Las Vegas economy is paying off considerably, as the metro’s population continued to expand at a record pace, bolstering multifamily demand. The job market has also seen significant growth, with 23,100 jobs added year-over-year through September, amounting to almost 1.1 million jobs throughout the metro. The leisure and hospitality sector—which added 8,300 jobs—had the largest share out of the total employment pool, at 28.9 percent. The mining, logging and construction sector followed, which gained shy of 6,000 jobs for an 8.9 percent expansion.
Multifamily construction activity is booming in Las Vegas, with 4,239 units delivered last year, the strongest level over the past decade. The growing demand maintained average rates, which rose by 6.4 percent year-over-year through October, when they stood at $1,123. That’s almost a quarter below the national average, a sign that rates are expected to continue to increase over the coming quarters. Construction is underway on 13 projects in Las Vegas totaling 3,535 units, with the bulk slated for completion next year. In the Henderson West submarket, Nevada West Development is working on the 536-unit Empire, expected to come online in early 2020. The upcoming 26-building project was more than 60 percent preleased in October.
3. Huntsville, Ala.
Huntsville, one of the top markets for multifamily occupancy, continues to have a tight employment market, which rose by 3.3 percent year-over-year through September, amounting to 303,000 jobs. The metro also had a 2.1 percent unemployment rate, 120 basis points below the national average. Professional and business services jobs accounted for almost half of the 9,600 jobs added in the metro—a record 7.2 percent uptick for the sector, whose growth rate far exceeded that of any other employment sector over the 12 months ending in September. And thanks to robust demographic expansion, multifamily demand is strong, resulting in increased average rates, which rose 7.1 percent year-over-year through October, to $842, leaving room for further potential growth.
Four communities were under construction in Huntsville as of October, totaling 721 units. In Madison, Ala., Tynes Development Corp. is developing a 274-apartment project dubbed The Station at Town Madison, slated for completion by year’s end. When completed, the community will be the largest delivery in the Huntsville–Southwest submarket over the past decade.
Phoenix’s multifamily sector continues to shine. The metro ranks as one of the top markets for multifamily completions, as a result of outstanding population growth—more than 15 percent between December 2010 and last December. Unsurprisingly, construction jobs were up by 9.4 percent, or by 12,200 positions—the highest growth rate year-over-year through September. That’s equal to almost a quarter of the jobs added to the market.
With $3 billion in capital expenditures planned over the next two years, the bio-science sector is expected to gain as many as 7,000 jobs. And while the unemployment rate was 50 basis points above the national average, it dropped by 50 basis points since September 2018. All these factors contributed to a 7.9 percent surge in average rates year-over-year through October. Rents surpassed $1,200 and, as demand remains incredibly strong, we expect rents to continue to increase. There were 57 projects underway in Phoenix in October totaling 14,694 apartments, with almost two-thirds expected to come online next year. That includes Management Support’s Sky at Chandler Airpark, a 504-unit community in Chandler. At build-out, the 12-building property will be the second-largest community in the Gilbert submarket.
1. Pensacola, Fla.
Pensacola remained the top market for rent growth in October, drawing on healthy employment and demographic expansion. Hurricane Dorian also impacted rent growth. Employers added 3,400 positions year-over-year through September, with the majority in the leisure and hospitality sector. As of July 2018, population grew by 10.2 percent since the 2010 Census. Development activity saw a significant boost, with 1,543 units completed in 2018—more than the previous three years combined.
While growth rate slowed in recent months, the escalating frequency and severity of extreme weather-related events are likely to continue to push rents to record levels. Average rents stood at $1,180 in October, up 8.3 percent year-over-year. Additionally, if the trend continues, lifestyle rents will be more heavily impacted—they saw a 9.0 percent uptick, 160 basis points above rents in the Renter-by-Necessity segment.
Completions are projected to reach a new record high in 2020 when nine projects totaling 1,811 units are slated for completion, equal to 65.8 percent of the pipeline. In Panama City, Rea Ventures Group is working on the Andrews Place Redevelopment, a 320-unit, fully affordable community expected to come online in early 2020. When delivered, the 15-building property will be the submarket’s largest community to date.