Seek and You Shall Find: Multifamily Developers Head to Which Cities in 2018?

Multifamily developers aren't finding it easy to plan their next development site, according to a recent feature article on National Real Estate Invetstor (NREI) online. According to the article, which quotes an economist at RealPage Inc, part of the issue derives from the longevity of the cycle itself. Finding good development deals that are financially sensible becomes tricky, even with other factors in your favor. Using data taken from YardiMatrix, NREI looked at where multifamily developers might end up this year pursuing those good deals. It's a waiting game to see how markets will absorb the supply being delivered and finding the right deal in the right neighborhoods. We looked at NREI's information and saw they looked at markets like...

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Northern New Jersey and Washington D.C., both of which are anticipating construction of upwards of 30,000 new apartments in 2018. Northern New Jersey benefits by its proximity to Manhattan but tenants benefit by the lower cost of living. One factor to watch is that the prime rental age in New York (20-34) is not going to grow over the next five years, according to their data. Yet the low cost of living and distance to the big city may be enough to overcome any rental demographic trouble. Similarly located cities like Northern VA and San Francisco's East Bay Area also anticipate new construction in 2018. Meanwhile, the nation's capital also expects an increase in apartments, while other gateway cities like Los Angeles and Boston will also see apartment inventory increase by up to 4%.

They note Charlotte, NC will complete construction of 7,500 apartments this year and that the city itself is home to a large tech-savvy millennial population. Unlike New Jersey, Charlotte's core rental demographic is expected to grow by 14.5% over the next five years, according to NREI. They do note that YardiMatrix data says Charlotte won't see major construction until the results are in for how the market absorbs the soon-to-be-completed inventory. NREI cites Nashville, TN as a secondary market that will be delivering 6,000 units but, like Charlotte, must wait and see how the market then handles that supply before planning more development.

Finally, NREI notes cities like North Dallas, TX as well as Orlando, Miami, and Dallas proper as those which are experiencing an influx of residents seeking affordable living and driving a need for multifamily construction. According to their numbers, North Dallas will begin working on 27,000 new units this year, and they cite the city's role as a top jobs-creator as being a driving force behind the growth. Each of these southern cities will enjoy an increase in multifamily inventory as they also enjoy an increase in tenant population.

The different markets offer opportunities for multifamily developers, but in many areas a wait-and-see approach may be advisable. With many cities enjoying delivery of apartment inventory, waiting to see how the area absorbs the supply is important before planning any future development. That said, there are still areas with affordable living which are drawing residents - and multifamily units will be in demand for years to come.

 

 

Elizabeth Wheeler