Top 10 Markets for Supply Growth

Decelerating rent growth and stagnant or falling occupancy rates suggest that developers can no longer expect the same returns experienced in recent years. As a result, development will likely slow down. According to Yardi Matrix data, these 10 markets are expected to see the greatest increases to supply this year.

By Meeghan Fuhr

Strong demand for apartments has fueled a surge of new supply in the multifamily industry. Decelerating rent growth and stagnant or falling occupancy rates have indicated to developers that they can no longer expect the same returns they have seen in recent years. As a result, development will likely slow down, with deliveries expected to peak in 2017. Here is a list of the 10 markets that are expected to have the greatest increase to supply this year, based on data compiled by Yardi Matrix.


10. Wilmington, N.C.

Wilmington, N.C., is a port city that draws in a steady flow of tourists and new residents moving from other U.S. markets. Employment growth was 3.0 percent last year, and with annual rent growth of 3.9 percent as of May 2017, it is no surprise that developers want to take advantage of this competitive market. However, with occupancy rates at 94.9 percent as of May and decreasing, Wilmington may have trouble absorbing the hefty 5.3 percent increase to supply expected by the end of the year.

9. Salt Lake City

Utah’s largest city is experiencing robust population and employment growth, with major companies such as Amazon and United Parcel Service (UPS) being drawn to the city. Employment growth was 3.7 percent last year, and rents have followed in tandem with the city’s period of economic expansion, with 5.8 percent rent growth over the 12-month period ending in May 2017. The market’s success is catching the eye of developers hoping to earn above-average returns during this period of prosperity.

8. Brooklyn, N.Y.

The NYC borough has a diversified economy with 2.1 percent employment growth in 2016. The market benefits from the affordability issues in nearby Manhattan, where rent is nearly two times greater than in Brooklyn. Momentum is starting to slow, however, as an influx of supply hits the market, and landlords are offering heavier concessions to fill their units. Occupancy remains high at 98.3 percent as of May 2017, and although additional supply may put pressure on rents and occupancy, the market will likely maintain its strong status.

7. Spokane, Wash.

Spokane, Wash., is experiencing healthy multifamily fundamentals drawing investors to the market. Employment, fueled by the health care and education industries, was up 2.7 percent in 2016, and rents are soaring with 7.7 percent growth over the 12-month period ending May 2017. Demand appears to remain strong with high occupancy at 97.0 percent as of May 2017, indicating the market will likely be able to absorb the surge in supply expected this year.

6. Boise, Idaho

Boise, Idaho’s emergence as a tech market has resulted in growth for the city across the board. People are moving to the city in droves, with population growth of 1.6 percent from domestic migration alone. 

The inflow of new residents combined with employment growth of 4.5 percent last year is fueling demand, and investor interest is mounting. Despite high occupancy and annual rent growth of 6.0 percent as of May 2017, the market still remains quite affordable and will likely continue to prosper.

5. Denver

Denver has one of the most diverse economies in the country and has experienced a development boom due to high demand for apartments as population, employment and housing prices increase. Rent growth has skyrocketed; however, this trend is slowing as an influx of supply is added to the market, particularly at the high end. This pattern of decelerating rent growth and falling occupancy rates will likely continue as developers are expected to deliver a 6.1 percent increase to inventory this year.

4. Central East Texas

Central East Texas draws in a young and educated talent pool thanks to Texas A&M University and Baylor University, and the business-friendly economy is fueling demand in the market, with employment growth of 3.7 percent last year. Despite steady occupancy growth over the past few years, overall occupancy was still low at 94.2 percent in May, and a flood of new supply could disrupt the trend of growth in the market.

3. West Palm Beach-Boca Raton, Fla.

The West Palm Beach-Boca Raton area in Florida has a diversified economy thanks to the Port of Palm Beach and numerous businesses in the market, including Office Depot’s headquarters. Boca Raton’s Economic Development Incentive Policy has created and retained more than 8,000 jobs in the area since 2010, and the market had employment growth of 3.7 percent last year. Rents increased 4.0 percent from May 2016 to May 2017, but occupancy dropped 0.7 percent over the same period, and a surge in new supply this year could drive down occupancy even further. 

2. Des Moines, Iowa

This city is a major hub for the insurance industry and home to a handful of major insurance companies’ headquarters. Rents increased 4.2 percent year-over-year as of May 2017, but occupancy dropped over the same period. The majority of new developments are concentrated in high-end rentals, and this oversaturation is putting pressure on occupancy rates. As developers continue to add new inventory to the market this year, deceleration will likely continue.

1. Nashville, Tenn.

Nashville, Tenn.’s economy is booming thanks to the emergence of health care and other knowledge-based industries. Last year, Nashville saw a significant amount of people move to the market, and that, combined with 4.0 percent employment growth, fueled robust demand for housing. With rents jumping 3.0 percent from May 2016 to May 2017 and continued expansion expected in the market, developers are looking to take advantage of the city’s growth.

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