Orlando and Las Vegas ranked first and second in Marcus & Millichap’s annual US Multifamily Index thanks to strong job creation and household formation rates.
Orlando and Las Vegas will be the nation’s top apartment markets this year, according to the 2022 National Multifamily Investment Forecast Released by Marcus & Millichap.
In this year’s U.S. Multi-Family Index – which ranks 46 major markets on a combination of criteria including local job market, vacancies, construction and affordability – Orlando and Las Vegas ranked first and second thanks to a high level of job creation and household formation rates – which the report says will lead to higher rental growth rates.
Southwest and Sunbelt metropolitan areas that experience above-average internal migration also top the index, including Phoenix (#5), Salt Lake City (#6) and Austin (#7) .
Florida markets accounted for five of the top 10 apartment markets in this year’s index – joining Orlando were Fort Lauderdale (#3), West Palm Beach (#4), Tampa (#8) and Miami (#10 ), while a rapid recovery in the pandemic-era economy put Atlanta in ninth place on the index.
The Northeast and Midwest markets ranked lower on the index due to a lower supply of multi-family housing and continued uncertainty about the return-to-office process. Pittsburgh ranked last out of the index’s 46 metros, with St. Louis and Baltimore ranking slightly higher.
The Marcus & Millichap report predicted a record 1.6 million households to be formed in 2022, but limited housing stock and rising home prices will continue to restrict opportunities for entry-level homeownership of range. Yes mortgage as rates rise over the year, the report predicts, demand for multi-family housing will be strengthened.
Real estate investors can also take advantage of 2022’s multi-family environment, the report adds.
“The multifamily property investment landscape concluded 2021 with a historic level of business activity after a marked slowdown the previous year,” the report said. “After a 22% contraction in 2020, transaction speed for apartments $1 million and above increased nearly 50% last year to align with the busiest years on record.”
“Abundant investor demand translated into higher selling prices,” the report continued. “The average price per unit in the United States increased nearly 9% in 2021 to over $180,000. As a result, cap rates have compressed, with the national average falling to 5%. »
The report speculated that rising interest rates will not deter property investors “given the property type’s inflation resistance relative to other investment vehicles”, and a new flow of foreign capital from sources in Canada, the United Kingdom and Saudi Arabia will continue to animate this sector as the trend of converting commercial property types into multi-family dwellings continues.
“Investors and developers are paying more attention to adaptive reuse,” the report says. “A record 20,000 apartments were opened in conversions last year, with the prospective pipeline looking similarly high. Underutilized offices and hotels have become more popular candidates for conversion in recent years, reducing construction times and budgets.”