By Meeghan Fuhr
Strong demand and increasing rents have fueled a wave of new development in the multifamily industry. As a result, rent growth has been decelerating in the majority of markets across the nation, with some even experiencing declining rents. Below is a list of the 10 markets that, despite the nationwide trend of deceleration, had the greatest year-over-year rent growth as of May 2017 based on data compiled by Yardi Matrix.
1. Reno, Nev.
Reno, Nev. made our top 10 list for markets with the greatest occupancy growth over the year, so it is no surprise that rents followed a similar pattern. Reno is an attractive market for businesses, including Tesla and Apple, driving up employment growth to 4.9 percent in 2016. Despite the surge in supply last year of 4.1 percent, Reno has seen both occupancy and rents increase, indicating the market still has healthy fundamentals ahead.
2. Colorado Springs, Colo.
Colorado Springs, Colo. is substantially more affordable than nearby Denver, drawing in residents looking for a lower cost of living while still having access to the city. Colorado Springs’ economy is strongly tied to its military base, but tech firms and start-ups have been expanding and diversifying the market in recent years. Colorado Springs has experienced substantial population and employment growth, and with no corresponding growth in supply, rents increased considerably over the 12-month period.
3. Sacramento, Calif.
Sacramento, Calif., is benefitting from the affordability issues in San Francisco and Oakland, where residents are fleeing and choosing to live in markets with a lower cost of living despite the long commute to the Bay Area. A surge in supply of 4.2 percent last year wasn’t enough to hinder rent growth, and with little development planned for the remainder of the year, rents will likely continue on the upward trend.
4. Tacoma, Wash.
Tacoma, Wash., is a growing market, drawing in residents and businesses driven out of Seattle as the metro becomes increasingly unaffordable. With a growing population and employment growth of 3.5 percent last year, demand for apartments has been strong. Limited new supply was added to the market last year, and with just a small development pipeline through 2017, the current trend of increasing rents will presumably continue.
5. Spokane, Wash.
Spokane, Wash., has had the perfect conditions necessary for rent growth; strong employment and population growth, high occupancy rates and nearly no new developments. The Fairchild Airforce Base drives the local economy, but the health care and education industries have been fueling new employment growth in the market, and demand for rental units remains strong.
6. Eugene, Ore.
Eugene, Ore., is home to the University of Oregon, a public research university drawing in a young and educated talent pool. The city is centered between the ocean and the mountains and has a reputation for its outdoor lifestyle. Demand for apartment units has been high, with occupancy rates slightly above 97 percent as of May 2017. Both rents and occupancy rates continue to rise despite the 2.8 percent increase to inventory last year, indicating the market still has room to absorb new supply.
7. Tri-Cities, Wash.
The Tri-Cities consist of Richland, Kennewick and Pasco, three bordering cities in Washington. The U.S. Department of Energy’s cleanup efforts at the Hanford nuclear waste site contribute to the local economy, bringing an educated workforce to the area. The market had fairly substantial employment growth in 2016 of 3.3 percent, and strong demand matched with limited new supply is driving rent growth in the Tri-Cities.
8. Midland – Odessa, Texas
Midland – Odessa, Texas, may be experiencing an inflection point. The market’s economy is heavily dependent on the petroleum industry, and with prices of oil and natural gas fluctuating in the past year, the market has experienced some growth. Despite unfavorable market conditions and a remarkable 5.6 percent loss in employment, both occupancy and rents have increased in the market.
9. Boise, Idaho
The high-tech industry in Boise, Idaho, is becoming increasingly important to the economy, with approximately 20 percent of workers holding a STEM degree. The market is growing in every respect, with population, employment and supply growth throughout 2016 and into the current year. Occupancy remains high and rents continue to rise despite the increased development last year.
10. Portland, Maine
Portland, Maine, has been benefiting from the revival of its port, which drives the local economy. The market had a surge in supply last year, with a 5.6 percent increase to existing inventory. With occupancy rates high and continued rent growth, the market has been able to successfully absorb the surge in new supply, particularly in the high-end luxury segment.