While we were used to seeing high increases in average occupancy rates in primary multifamily markets, the pandemic generated a shift in demand toward secondary and tertiary markets. Thanks to below-average rents and due to office work being performed mostly from home throughout last year, secondary (154,112 units or 2.3 percent of stock) and tertiary markets (96,160 units or 2.0 percent of stock) saw positive net absorption in 2020, according to Yardi Matrix data. Gateway metros were on the other end of the spectrum (-7,599 units or -0.3 percent of stock).
Between the five markets on this list, only some 5,000 units were underway as of February, in a sign that the average occupancy rate is likely to continue to increase here. And while the occupancy rate was down 30 basis points year-over-year through February nationwide, these five metros saw upticks of as little as 190 basis points during the same time.
|Rank||Metro||Occupancy Feb 2020||Occupancy Feb 2021||Growth (basis points)|
Source: Yardi Matrix
READ ALSO: Pandemic Impact on Multifamily Lease-Ups
5. Corpus Christi, Texas
Corpus Christi, Texas, has come a long way in recent years, after ranking among the nation’s top markets for occupancy loss in 2017. While the metro’s population, according to estimates, rose 5.9 percent between the 2010 census and July 2019, Corpus Christi witnessed a significant slowdown in demographic growth between 2015 and 2019. This, coupled with a decline in completions since 2017, contributed to an uptick in the average occupancy rate, which stood at 92.6 percent in February. That’s a 190-basis-point improvement year-over-year, but still the lowest figure on this list.
Developers were working on seven properties totaling 836 units in the metro in February, equal to 2.4 percent of existing stock. While all properties are slated to come online as early as the year-end, delays could still occur due to current health and economic hardships. Rockport Properties is working on its 216-unit Pearl Point in the Aransas submarket, making it the largest project underway in the metro. Once delivered, the nine-building property will be the submarket’s biggest community to date, as well as the ninth-largest project completed in five years.
4. Inland Empire, Calif.
Thanks to the surge of e-commerce due to the pandemic, the industrial sector is seeing a considerable uptick in demand, which also benefits the Inland Empire’s multifamily market. But the metro had already been on an upward trajectory in recent years. After deliveries slid in 2018 to only 590 units, a 59.2 percent decline from the previous year, they rose significantly in the following two years. In 2020, 15 communities totaling 3,087 units reached completion, the highest level over the past decade. With Californians relocating from large metros to more affordable areas, demand for new supply is high in smaller metros across the state. As a result, the occupancy rate rose 210 basis points year-over-year through February to 97.8 percent, the highest level on this list.
In the Inland Empire, developers were working on some 3,100 units in February, with the bulk of projects forecast to come online as early as the end of the year. Although development activity in the larger California multifamily markets is more fast-paced compared to that of the Inland Empire, the metro is catching up. In the Corona submarket, Sares-Regis Group is constructing the largest project underway in the metro—the 442-unit The Monterey—with the help of a $77 million loan from PNC Bank. When completed, the 20-building community will be the submarket’s biggest multifamily project to date, as well as the third-largest project to come online in the metro over the past decade.
3. Macon, Ga.
Benefiting from its relative proximity to Atlanta, which witnessed the second-highest positive net absorption last year (12,864 units), the multifamily market in Macon, Ga., is on the rise again. Although the shelter-in-place order that went into effect at the end of March 2020 designated residential construction as critical infrastructure, the number of completed units in Macon slipped last year to only 160. However, deliveries are projected to surpass 700 units in 2021. As a result of slow development activity, the average occupancy rate rose year-over-year through February by 250 basis points to 96.5 percent.
As of February, a total of 705 apartments were underway in the metro, equal to 2.7 percent of existing stock. All six projects are slated for completion as early as year-end. An individual developer is working on the largest project—the 200-unit Village North in Warner Robins, Ga. The 29-building community will come online with the help of a $20.5 million construction loan from Columbia Pacific Advisors. At build-out, Village North will be the submarket’s second-largest community to date and the largest one to reach completion in more than three decades.
2. Lafayette-Lake Charles, La.
Because population growth started to slow down in the metro in recent years, development activity decreased significantly following the completion of more than 1,200 units in 2016. As a result of lagging demand, the number of new communities added to inventory continued to decline, with no deliveries in 2017 and 2019. However, last year, a total of 558 apartments came online, as demand for suburban supply is on the rise in most markets. This pushed up the average rent over the better part of the last year, with the occupancy rate also witnessing an upward trend in 2020. The occupancy rate stood at 93.7 percent in February, up 280 basis points year-over-year.
Three projects totaling 296 units were underway in the metro as of February, equal to 0.9 percent of inventory. Amesbury Cos. is working on the largest development—the 164-unit Sugar Mill Villas in Youngsville, La. Developed with the assistance of a HUD 221(d)(4) loan in the amount of $25.3 million originated by Greystone Servicing Corp., the upcoming community is expected to come online in the second quarter.
READ ALSO: Multifamily Barriers to Construction
1. Anchorage, Alaska
While the metro’s population rose 4.1 percent between the 2010 census and July 2019, based on estimates, starting with 2017, Anchorage’s population has been on a downward path. In early April, Acting Mayor Austin Quinn-Davidson asked the Assembly to extend Anchorage’s emergency status—for the eighth time since the pandemic began—through July 16. It’s another sign that the metro is facing the harsh effects of the health crisis, with all major employment sectors contracting in the 12 months ending in February. Anchorage lost a total of 11,100 positions, equal to a 6 percent decrease. Meanwhile, the average occupancy rate rose 330 basis points year-over-year through February, to 95.4 percent.
Because only four multifamily projects reached completion last decade, the average occupancy rate has seen a positive impact. And Anchorage is by far the smallest multifamily market on this list, with an inventory of fewer than 10,000 units. This is not likely to increase significantly anytime soon, with only 50 apartments under construction as of February. In the metro’s Anchorage East submarket, the Cook Inlet Housing Authority is working on the second phase of Grass Creek North, located within an Opportunity Zone and slated for delivery in the second quarter. The partially affordable project represents 0.6 percent of the metro’s existing stock.
Yardi Matrix covers all multifamily properties of 50-plus units across 133 markets in the United States. This ranking reflects transactions for properties within that sample group.