SVNIC’s 2016 Market Outlook Reports assess the current state of the national commercial real estate market, and identify micro-trends within specific geographic regions and industries for 2016. Today we are delving into the 2016 Top Multifamily Markets to Watch. Not the largest or the most actively contested markets, the 2016 Multifamily Markets to Watch are each at an important juncture that presents unique opportunities for investment. Together, they reflect the diversity of trends that is driving the economy and commercial real estate performance in markets across the country.
Top Multifamily Market to Watch: Phoenix, AZ
Phoenix experienced significant gains in overall employment in 2015 that moved the number of jobs significantly above pre-recession peaks as unemployment fell to 4.6% in January ‘16 with continued annualized employment gains of 3.6%. The population grew by 6.2% from 2010 to 2014, according to the Census Bureau, helping to fuel new demand for apartment units. The city utilizes approximately 46% of its housing units as rentals and has relative affordability with high quality of life making the market a prime one to grow in 2016 and beyond, with rents expected to grow over 5% this year. The leading employment sectors are Information, Construction, Financial Activities, Education and Health Services, and Professional and Business Services, growing at annualized rates of 7.6%, 6.3%, 5.3%, 5.2%, and 5.1%, respectively.
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Over the next few weeks, the SVN Blog will be featuring posts that will focus on each of the top markets to watch for industrial, multifamily, office, and retail properties. SVN Advisors from selected top markets have provided their industry expertise regarding what to look out for in their specific market in the coming months. Don’t miss out on these important insights – subscribe to the SVN Blog on the right side of the blog homepage.
To read more on other top multifamily markets, download the full version of the 2016 Multifamily Market Outlook report here.
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Job growth in Philadelphia has brought the city back above pre-recession employment levels as unemployment stays steady at 4.8% as of January ‘16 with modest annualized employment growth of 2.1%, according to the Bureau of Labor Statistics. Population growth has been below the national average as the city only gained 2.2% from 2010 to 2014, according to the Census Bureau. Accordingly, demand for new apartment units is modest compared to other metros of similar size; yet the city does have a relatively high use of housing units as rentals at approximately 47%. Philadelphia does have an advantage in affordability, especially compared with other East Coast metros, and thus has growth potential with rents forecast to grow by over 3% in 2016. The city’s top sectors for job growth include Mining, Logging, and Construction as well as Professional and Business Services where are expanding at annualized rates of 8.2% and 3.7%, respectively.
The multifamily market in Charlotte has experienced strong growth in demand as the city has gained 10.1% in population from 2010 to 2014, according to the Census Bureau. This has been fueled by significant job growth that has set new records substantially above pre-recession peaks, leading the present unemployment rate to sit at 5.3% as of January ‘16 with new job creation occurring at an annualized rate of 2.8%, according to the Bureau of Labor Statistics. Approximately 45% of the city’s housing stock is renter occupied. Thus, a good deal of the new population is likely to demand an apartment. Further, gross rents are below national averages, making Charlotte affordable and capable of seeing meaningful rent growth. New supply has grown approximately 4% in 2015 which will lower rent growth slightly in 2016, but still likely to be robust and above 4%. Many sectors are adding jobs at annualized rates above 4%, including Financial Activities, Professional and Business Services, and Leisure and Hospitality. However, this city does face a unique risk to continued growth from the new “bathroom” law, perceived very negatively by many; this could jeopardize new job growth and thus the market if firms choose to relocate or otherwise curtail operations in the state.
The Denver multifamily market has experienced significant additions of new supply as its population has grown 10.6% from 2010 to 2014, according to the Census Bureau. Further, the employment market is outstanding with 3.0% unemployment as of January ‘16 and annualized job growth of 2.5%, according to the Bureau of Labor Statistics. Denver features a larger renter population with approximately 50% of its metro’s housing units used for rental purposes; still rental rates are relatively affordable for a metro of its size, giving it room to grow. Top sectors for employment growth include Leisure and Hospitality, Financial Activities, Manufacturing, and Professional and Business Services growing at annualized rates of 6.0%, 3.9%, 3.5%, and 3.2%, respectively. As such, rent growth could hit 7% in 2016.
