Top Markets, Small and Large, Under the Radar for Multifamily Development

Recent data from Meyers Research points to lesser-known hot spots for multifamily.

Seeking the brightest heat lamps for real estate action typically conjures a list of the usual suspects—Dallas, San Francisco, Seattle, and Washington, D.C. But experts are now looking at numbers from what used to be considered secondary markets and finding a new outer ring of boomtowns.

Kimberly Byrum, a managing principal specializing in multifamily with residential market data firm Meyers Research—owned by MFE’s parent company—recently revealed her list of the top under-the-radar markets for development—ranging from small to large cities across the nation.

Byrum analyzed lease trade-out data, excluded California markets, considered total rent payments, examined inventory levels including what’s already in the pipeline, and parsed demographic data. Here are the markets that rose to the top.

1. Reno, Nev.
The Biggest Little City in the World is a good bet based on its steady job growth. Over the last three years the growth rate has been 5.1% with high-paying job sectors clocking in at 9.9% growth over the past 12 months. Future job growth is projected to stay above 2% a year.

Affordability is also strong in Reno as the rents at Class A properties as compared with median household income (MHI) shows a 25% ratio. The inventory pipeline is currently carrying almost 3% the number of existing units, but, with growing job numbers, Reno looks like a safe bet, especially considering there is no personal income tax in Nevada. Active developers are Lewis Group, Reno Urban Developers, Silverwing Development, and Tanamera Construction.

2. Colorado Springs, Colo.
Sitting 60 miles south of Denver and at the base of Pikes Peak, Colorado Springs has strong growth numbers in new leases and renewal rental rates. Health-care sector job growth is high, increasing 4.2% over the past 12 months. Similar to Reno, the Class A apartment rents compared with MHI is 24%, with just 2% of existing units in the inventory pipeline. The official tagline for Colorado Springs is “Live It Up,” which sounds just about right for the near future of multifamily development. Active developers are Continental Properties and Nor’wood Development Group.

3. Boise, Idaho
The City of Trees has experienced strong job growth of 4.3% over the last three years. Health-care sector job growth has also been strong at 5.8% over the last 12 months. People are also moving to Boise as the city is expecting a 2% increase in general population growth. Pipeline numbers show 4% of existing units coming online with Class A apartment rents at $1.44 per square foot, which is relatively low. The only caveat in Idaho is a lower MHI, which computes to a 28% rent-to-income affordability figure.

4. Salt Lake City
More a mid-size than a small-sized market, Salt Lake City is “Different by Nature” and has also shown strong job growth over the last three years with the numbers coming in at 4.3%. Salt Lake also has the highest MHI level for a mid-sized market. Rents are higher here clocking in at $1.61 per square foot, and the pipeline only has 2% of existing units currently heading downstream. Active developers are Cowboy Properties, Gardiner Properties, ICO Cos., Rimrock, and SALT Development.

5. Jacksonville, Fla.
They say it’s easier in Jacksonville, and having a 3.2% job growth over the past three years doesn’t hurt. Health-care sector job growth is showing a 3% gain over the last 12 months, and the city boasts the lowest Class A apartment rents in the mid-sized markets at $1.30 per square foot. The inventory pipeline is showing less than 2% of existing units. Like Nevada, Florida has no state income tax. Active developers include Catalyst, Chance Partners, and Tribridge.

6. Orlando, Fla.
The City Beautiful, known as Orlando, has experienced 3.8% job growth over the past three years. Of those jobs, the high-paying sectors grew even higher with a jump of 6% as measured over the last 12 months. Future job growth is predicted to be over 2% with Class A apartment rents showing $1.59 per square foot. The pipeline measurements are currently showing over 3% of existing units. Orlando’s only downside is a 32% income-to-rent ratio. Active submarkets include Central, Kissimmee, Ocoee, South Orange, and Winter Park/Maitland. Active developers include Bainbridge and Contravest.

7. Las Vegas
What’s been staying in Las Vegas lately is job growth, which has increased 3.1% over the past three years. On top of that, the total population for Sin City is expected to grow at more than 2%. High-paying job sectors have grown 3.9% over the past 12 months while the Class A apartment rent ratio to income is at a comfortable 26%. The future pipeline is currently in check. Active submarkets include Southwest and Summerlin, while the active developers in town are Nevada West and The Calida Group.

8. Fort Worth, Texas
Unlike Dallas, it is said that Fort Worth “is where the west begins.” Strong job growth has kept things popping in north Texas as Fort Worth shows a 3.6% boost over the last three years. The total population is expected to grow at 1.8%. A relatively high MHI has the Class A apartment rent ratio at 24%. Less than 2% of existing units are currently in the pipeline, and the single-family home market is considered affordable. The active submarkets are Intown FW/University, North FW/Keller, Haltom City, and Hurst/Euless/Bedford. Active developers are JPI, Greystar, Alliance, and Wood Partners. Added bonus, Texas also has no state income tax.

9. Phoenix
There is no secret about what’s been happening in “the Valley of the Sun.” Job growth has been strong for the past three years at 3.3%. Total population is expected to grow at more than 2%. Health-care job growth is also high at 4.5% over last 12 months. The Class A apartment rent ratio to MHI is 26%. The rents in Phoenix tend to be higher and the units smaller at 849 square feet. The future pipeline has about 2% of existing units coming online. Active submarkets are Avondale/Glendale, Central, Chandler, Deer Valley, Gilbert, North Central, North Scottsdale, and Tempe. Active developers include Alliance, Christopher Todd Communities, Mark-Taylor Residential, and Wood Partners.

10. Honorable Mentions

  • Des Moines, Iowa: Positives include high MHI and over 3% health-care job growth, total population is expecting moderate growth, Class A rents are lower, single-family housing is affordable.
  • Indianapolis: Class A rents are approaching $1,300 per month, strong MHI and moderate growth projected, and single-family housing is affordable.
  • Palm Bay, Fla.: The market is seeing strong job growth, with growth in high-paying job sectors and health care, MHI is low but expected to grow, and the pipeline is increasing.

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