Top Performing Multifamily Rental Markets — Q1 2016
The multifamily market has experienced a nearly unprecedented run since the end of the recession. Multifamily growth has been driven by age related demographic trends, homeownership is nearing its lowest point in nearly half a century, and foreign investment reaching new highs.
As the multifamily cycle matures, investors are beginning to seek out value-add markets. This week’s release of Q1 2016 data from Reis gives an opportunity to examine the strongest performing markets over the last 12 months.
According to Reis, the hottest multifamily market in the U.S. has been Portland, where asking rents increased 9.7% year-over-year, climbing to $1,084/unit in Q1 2016 from $988/unit in Q1 2015. Only one year ago, Portland ranked #26 on the rent growth list. Job growth has been strong across the board in Portland, boosted by high-tech commerce, including renewable energy businesses and tech start-ups. As compared to the Bay Area, Portland’s local economy — built on port distribution, strong tourism, and affordability — should help the market remain a strong performer in the longer run.
(Source: Arbor, Reis Inc.)
Another big mover among primary metros was Atlanta, where asking rents increased 7.5%, or $1,020/unit up from $949/unit. The market moved to #3 on the rent growth list, up from #21 one year ago. Atlanta has shown signs of its pre-recession past, with a strong housing market and inbound migration amid steady job growth.
Markets in the Bay Area remained near the top of the list during the first quarter. San Francisco, which held the #3 spot one year ago, came in at #2 with a 7.9% increase; Sacramento came in at #5 with a 6.9% increase (previously #34), Oakland-East Bay ranked #8 with a 6.4% increase (previously #4), and San Jose fell to #10 while posting a 5.7% growth rate (the #1 market one year ago).
Seattle (#4) and Denver (#6), two markets that have also been boosted by the technology industry, posted growth rates of 7.4% and 6.6%, respectively. Other markets that made the list were San Diego (up 6.5%), New Orleans (up 5.9%), Phoenix (up 5.8%), and Charleston (up 5.8%).
None of the 88 primary metros covered by Reis posted rent declines during the last 12 months.
In addition to the primary metros covered by Reis, another 184 secondary metros are covered in their multifamily data. Some of these secondary metros posted higher gains than the top primary metros. At the top of the list, Flagstaff, Ariz. posted the strongest rent growth at 12.2%, rising to $1,197/unit up from $1,067/unit.
(Source: Arbor, Reis Inc.)
Vallejo-Fairfield, Calif., with its close proximity to the Bay Area, came in #2 with 10.1% growth, rising to $1,376/unit up from $1,250/unit. Bend, Ore. (9.5%), Salem, Ore. (8.6%), and Ithaca, N.Y. (8.1%) rounded out the top five.
The oil-dependent Odessa-Midland, Texas market posted the largest rent decline among all Reis metros over the last 12 months, falling 15.9%.
As the multifamily market reaches an equilibrium point in the cycle, investors will be continuing to seek out value-add markets.