Up-and-Coming Cities for New Apartments in 2019
Despite concerns about an economic slowdown, multifamily development shows no sign of decelerating. MHN identifies five leading secondary and tertiary metros to watch in 2019.
In 2019, nearly 300,000 units are expected to be delivered throughout the U.S., roughly 2.2 percent of existing rental inventory, according to Yardi Matrix. The figures are anticipated to hold roughly the same line through 2020, which means strong demand will need to continue in order to avoid a decrease in occupancy.
In addition to the booming tech markets creating high-paying jobs where upscale units are being delivered at a high clip and well-adjusted gateway markets with strong capital flow and institutional interest, there is a layer of small to mid-sized metros that are benefiting from population growth, economic diversification and, consequently, housing demand. It wasn’t long until developers followed suit with ambitious projects, pushing these areas among the nation’s first in terms of new supply.
READ ALSO: Top 5 Markets for Multifamily Deliveries
Charleston, Colorado Springs, Salt Lake City, Raleigh and Louisville are the up-and-coming cities for new apartments in 2019. The metros are the top second or third tier markets in terms of anticipated inventory expansion for the whole year.
5. Louisville
Kentucky’s largest city is the fifth on our list with new deliveries accounting for 3.6 percent of total stock for the whole of 2019. The metro is expected to add a total of 2,800 units this year, as development has picked up over the last couple of years, following economic growth. The logistics sector, along with hospitality are seeing increased job gains, fueling housing demand.
The largest project underway with a 2019 due date is Noltemeyer Co.’s Willow Green, a 496-unit community in the Okolona/Hillview/Highview submarket. The community will include one-, two- and three-bedroom units.
4. Raleigh-Durham
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Raleigh is one of the best cities for real estate investment in 2019, with rent growth at 4.4 percent as of June and acquisition yields ranging between 5.5 percent and 6.5 percent for properties with value-add potential. This North Carolina metro is gaining residents drawn by its expanding economy and affordable cost of living, while the availability of top education centers provides a steady flow of highly skilled professionals.
With names such as Amazon investing here and creating thousands of jobs, developers are ready to meet the needs of the new renters. At the end of the year, Raleigh will have added 5,800 units, representing 3.8 percent of total stock. Estimates for 2020 show similar figures.
One of the largest projects completed this year is Widewaters’ Parkstone at Knightdale. The community in Knightdale includes 350 apartments.
3. Salt Lake City
This secondary market is on several lists of U.S. metros including “fastest growing cities,” “emerging real estate markets in 2019” or “top markets for rent growth.” Significant employment gains have led to increased housing demand, particularly in the workforce sector, prompting developers to continue adding new apartments.
Salt Lake City is anticipated to add more than 4,200 units this year, accounting for 4.3 percent of total inventory, occupying the third position in our ranking. The largest community underway and expected to be delivered this year is SALT Development’s Hardware, bringing 453 units in Downtown Salt Lake City. The project is transforming an industrial building into modern luxury homes.
2. Colorado Springs
Colorado Springs—probably the most surprising name on our list of up-and-coming cities for new apartments—is benefiting from the growth of business-friendly Denver. With a rent growth rate above the 5.0 percent threshold, this small metro located at the foot of the Rocky Mountains is seeing increased development activity. More than 2,090 units are anticipated to be completed this year, 5.3 percent of stock, making SLC the first runner-up in our ranking.
Housing demand is pushed upwards by professionals who decide to commute to Denver, enjoying higher wages and lower rents. Fast-paced population growth is another factor fueling the expansion of this market. The Colorado State Demography Office projects a 48 percent population increase by 2050 in El Paso County, which translates to roughly 300,000 residents.
The largest project under construction with a 2019 delivery date is the 244-unit Watermark on Union in Colorado Springs’ far north side. The property is owned by Indianapolis-based Watermark Residential and will be managed by Alliance Residential Co.
1. Charleston
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This South Carolina port city, popular with students and known for its automotive and cargo industries is ranking highest in terms of expansion of apartments inventory. More than 3,600 units are expected to be delivered in 2019, representing 5.8 percent of total stock—the same rate as Austin, Texas’ booming metro.
READ ALSO: Top Multifamily Completions in Austin
Charleston is seeing an above-average employment growth—2.3 percent as of July, above the U.S. figure of 1.5 percent—that fuels housing demand and maintains high occupancy levels despite wave of new units. More than 4,100 apartments were absorbed in the market, in the 12 months ending in July, maintaining occupancy levels flat, at 94.3 percent.
The largest community anticipated to open by year’s end is South City Partners’ 10 WestEdge, a 350-unit development scheduled for completion in October. The development is part of a waterfront mixed-use project that also includes office space and retail and is located on the Charleston peninsula.
Methodology: For this ranking, Multi-Housing News focused on second and third tier markets with an MSA population of under 1.5 million (Census Bureau 2018 data for metropolitan statistical areas) and used Yardi Matrix data.
