With the economy and jobs coming back, panelists at the NMHC Apartment Strategies Outlook Conference session, “Here, There, Everywhere - The Markets: A Full Sweep,” discussed and compared multifamily performance and the future outlook for the following five regions:
West. According to the panelists, the West continues to be the top
performing market. Specifically, the San Francisco Bay Area consistently
outperforms with 7 to 10 percent rent growth every year. High wage growth jobs
are ultimately driving the attraction of residents. And the Los Angeles and San
Diego rental markets, while not as strong as San Francisco, also continue to
Southwest. In the Southwest, the Denver rental market is still outperforming and should continue to do so when considering anticipated job expansion. Phoenix was one of the last cities to recover from the housing crisis, but panelists predicted a solid year ahead. In Texas, Austin defied logic by filling 8,000 new units, while Dallas remained steady, but experienced somewhat slower growth in rental rates last year. Although, overall, the Southwest has typically seen 2 percent to 3 percent annual rent growth, some areas could see growth at as much as 4 percent to 5 percent this year. In addition, suburban growth is taking off after a long period of urban development.
Midwest. Markets in the Midwest are making progress, but panelist said it’s below the radar. Cities like Chicago, which is head and shoulders above the rest, have been applying the “everything in moderation” rule and continue to have a solid outlook. Metropolitan Detroit saw a rent spike in 2012 and is still seeing solid rental gains. And, despite a heavy supply, panelists said Indianapolis should firm up a bit, while Kansas City and Minneapolis are likely to see slower rent inflation.
Although the panelists took a cautious approach overall to the Midwest, they focused on Chicago and Minneapolis, in particular, as cities to watch. Specifically, they said they like Minneapolis because job growth there has been better than Chicago; however, demand fundamentals are not as high in Minneapolis.
Southeast. Panelists emphasized that the Southeast is more of a mixed bag in terms of the timing of a recovery. The region’s markets began the recovery differently, but, for the most part, face a similar outlook. Rent growth continues to decelerate, in particular, in Nashville. And although Raleigh was relatively early to recovery, the market soon became really soft.
In South Florida, panelists said they are hearing condo grumblings again. Specifically, deals initiated as apartments are switching to condos, but there could continue to be a strong multifamily market there in the coming years. Overall, the panelists said they continue to like Atlanta and also agree that the South Florida market will be interesting with some anticipated push and pull due to the economy and the opening of Cuba.
Northeast. When it comes to the Northeast, panelists emphasized that Washington, D.C., has only been leapfrogged by Houston when it comes to a softening rental market. Generally, East Coast markets led early in the recovery and had a tough 2014, but panelists predicted some better news ahead. They also noted that the New York City rental market is likely to slow down due to moderate growth, hefty supply and low affordability. In addition, submarkets in Boston, like the North Side, are much stronger than rest, so there is an imbalance. And Philadelphia’s story is that its market will likely continue to struggle.
In total, the panelists were most bullish on Los Angeles, Southern California, Tampa, Orlando and Atlanta, noting that they were the markets to watch. However, although each of these markets are likely to experience strong or stronger job growth, they agreed that the missing piece of the puzzle is wage growth.