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Best Multifamily Markets in 2021

Given the massive changes to the multifamily housing industry we saw in 2020 as a result of the pandemic, any investor’s time is well-spent considering the new landscape. As millennials transition to home buying and renters reevaluate their housing needs, so too have the prospects changed for multifamily housing in major cities that were previously hotspots. Read on to learn about the changes that 2020 brought and the new top markets in 2021. Here are some of the best multifamily markets in 2021 that investors should consider!

Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More

Emerging Multifamily Housing Market Trends in 2021

Several trends have emerged over the past year impacting the multifamily market. Of course, it remains to be seen if these changes will disappear as we settle into whatever the new normal may be.

Declining Demand & Rental Prices in Major Urban Areas

Major urban areas with high-dollar rental prices have seen a decline in demand, and consequently prices, over the past 12 months. With major employers like Microsoft, Dropbox, and Facebook announcing long-term remote work intentions, their employees can leave high-density, high-rent areas like Silicon Valley for more affordable areas.

This trend is appearing in mid-size markets as well. Even in cities with more moderate rental prices, like Denver, average rent has decreased as city-dwellers move away from the city center for larger units and more outdoor access.

Here are some more nuanced impacts that this larger trend is having on the multifamily rental market:

  • Space requirements have changed. As many households now have multiple adults working from home, and even kids learning from home, the open floor plan has much less appeal. Regardless of the unit set up, at the end of the day, many households simply require more space to accommodate all of these conflicting needs during the work day.
  • Some amenities are now worthless while newer amenities are deal breakers. Buildings with previously adequate gyms and recreation rooms that relied on these amenities as marketing lures now find these same rooms to be wasted real estate thanks to social distancing requirements. Even as local restrictions change, allowing these rooms to open at limited capacity, many tenants’ desire to be in these spaces remain firmly in the pandemic safety mindset. Instead, rooftop patios, spacious balconies, and outdoor space are must-haves in 2021.

Record-Setting Job Loss Impacting Multifamily Market

Of course, many renters are not leaving the market for positive reasons. Record-setting job loss has chipped away and bottom lines for multifamily housing investors:

  • Millions of Americans are behind on rent. As of March 29, 2021, an estimated 15 percent of adult renters are behind on their rent payments. Given that 3 in 10 Americans report difficulty paying their usual expenses, many must move to units less expensive than they are accustomed.
  • The Federal Eviction Moratorium protects non-paying tenants. Landlords lost revenue over the past year due to the federal moratorium, which has been extended through June 30, 2021.
  • Court backlogs delay eviction procedures. While most courts permit the filing of evictions, in some areas, getting a foot in the courtroom (or a Zoom link) can be a monumental task. Courts face dockets backlogged by hundreds if not thousands of cases as they too have dealt with changing the way they do business to meet public safety guidelines. This impacts not only the landlords dealing with non-payment of rent, but also those with tenants in violation of lease terms who are not protected by the moratorium.

These trends have certainly made their marks on some cities more than others. In some markets, the changes have been for the better. Below, we highlight some of the cities with the best multifamily housing markets as we enter the second summer of the pandemic.

Positive Net Migration Proves Promising for Many Markets

The multifamily housing market hit the wall in some cities, but in others, it is smoothly climbing up and over. We will look at a few different indicators for determining the best markets, but a solid place to start is the growth of cities.

To get an idea of the future demand for any multifamily project that catches your eye, consider whether that city seems to be on the loss or gain side of population movement in the past year. Markets receiving the exodus of renters from high-density and high-price areas can be a great place to start. According to U.S. News and World Report, the following are the fastest-growing cities of 2020-2021.

  • Fort Myers, Florida

Median Monthly Rent: $1,093

  • Myrtle Beach, South Carolina

Median Monthly Rent: $913

  • Naples, Florida

Median Monthly Rent: $1,228

  • Sarasota, Florida

Median Monthly Rent: $1,152

  • Ocala, Florida

Median Monthly Rent: $859

  • Daytona Beach, Florida

Median Monthly Rent: $1,029

  • Lakeland, Florida

Median Monthly Rent: $944

  • Port St. Lucie, Florida

Median Monthly Rent: $1,126

  • Fort Collins, Colorado

Median Monthly Rent: $1,228

  • Austin Texas

Median Monthly Rent: $1,217

These metrics heavily skew toward Florida, and not everyone can or should invest in the Sunshine State. Fortunately, we have some other numbers to guide your investments as well.

Weigh Buy/Hold/Sell Recommendations When Selecting a Market

The PwC and Urban Land Institute annual Emerging Trends in Real Estate Report for 2021 takes a deep dive into the way everyone’s ‘new normal’ translated to the real estate world. 

Emerging Trends surveys local real estate professionals to get a ground-level pulse of the real estate market in each area. The surveys range from confidence in the area’s economy to those professionals’ suggestions to buy, hold, or sell real estate investments in that market.

Here are the findings for the 10 cities with the greatest percentage of multifamily ‘buy’ recommendations.

* Data presented is percentage of buy, hold, and sell recommendations based on PwC’s Emerging Trends in Real Estate 2021 survey:

  • Raleigh/Durham, North Carolina
  • Buy: 72%
  • Hold: 20%
  • Sell: 9%
  • Tampa/St. Petersburg, Florida
  • Buy: 67%
  • Hold: 30%
  • Sell: 2%
  • Salt Lake City, Utah
  • Buy: 67%
  • Hold: 27%
  • Sell: 6%
  • Austin, Texas
  • Buy: 63%
  • Hold: 26%
  • Sell:12%
  • Boston, Massachusetts
  • Buy: 60%
  • Hold: 32%
  • Sell: 9%
  • Boise, Idaho
  • Buy: 59%
  • Hold: 34%
  • Sell: 6%
  • Nashville, Tennessee
  • Buy: 59%
  • Hold: 37%
  • Sell: 4%
  • Charlotte, North Carolina
  • Buy: 56%
  • Hold: 36%
  • Sell: 8%
  • San Antonio, Texas
  • Buy: 55%
  • Hold: 35%
  • Sell: 10%
  • Columbus, Ohio
  • Buy: 55%
  • Hold: 45%
  • Sell: 0%

While the Florida locations previously identified for growth do not make this multifamily list, they do make the top 10 for office property buy/hold/sell confidence.

Emerging Trends also identified these areas as magnet markets, because they are growing faster than the U.S. average. These markets are on the report’s list of the hottest markets to watch in the upcoming year.

  • The Sunshine State – Fort Lauderdale, Florida; Jacksonville, Florida; Miami, Florida; and West Palm Beach, Florida
  • 18-Hour Cities – Austin, Texas; Charlotte, North Carolina; Denver, Colorado; Minneapolis, Minnesota; Nashville, Tennessee; Portland, Oregon; Raleigh/Durham, North Carolina; Salt Lake City, Utah; San Diego, California; Seattle, Washington
  • Super Sun Belt – Atlanta, Georgia; Dallas/Fort Worth, Texas; Houston, Texas; Phoenix, Arizona; San Antonio, Texas; Tampa/St. Petersburg, Florida

Availability of Properties Remains Linchpin for Deals

It can be hard to go a day without seeing or hearing a headline about the record-low inventory. Of course, if there are no properties to invest in, it does not matter how hot a particular city is. The commercial real estate and data research company Yardi Matrix detailed the multifamily construction pipeline for 2021.

There is no denying that construction has encountered some pitfalls this past year. Temporary shutdowns of sites and supply chain issues disrupted the expected completion timelines for many projects. Despite all that, the number of building completions in some markets is astounding.

Here are the top 10 markets for completions of new multifamily construction in 2021:

1. Dallas, Texas

Completions: 22,909

2. Miami, Florida

Completions: 16,262

3. Washington, D.C.:

Completions: 14,541

4. Houston, Texas

Completions: 11,500

5. Los Angeles, California

Completions: 11,296

6. Atlanta, Georgia

Completions: 10,939

7. Austin, Texas

Completions: 10,301

8. Seattle, Washington

Completions: 9,816

9. Phoenix, Arizona

Completions: 9,334

10. Denver, Colorado

Completions: 8,653

Final Thoughts

We leave the first year of the pandemic with many unknowns that will continue to shape the prospects for multifamily investing in key markets:

  • Will additional waves of the virus lead to further extension of the federal eviction moratorium? Landlords across the country are counting on the end of the moratorium to turn units over to paying tenants. Whether units remain in this holding pattern beyond the end of June remains to be seen.
  • For how long will the shift to suburban living last? Will new multifamily dwellings in emerging markets maintain their appeal through this decade? How quickly will city dwellers be comfortable returning to the cities, with all their perks and drawbacks?
  • Is remote work here to stay? This question is top of mind for managers, employees, developers, landlords, and investors. Families who spent some or all of the pandemic in unworkable living quarters may be reluctant to return to smaller spaces and risk a repeat of Spring 2020.

With these risks come fantastic opportunities to invest in new multifamily markets, or to buck the trend and stick with the tried-and-true favorites of the past decade.

Life Bridge Capital is a leading real estate syndication company. We offer our investment partners the opportunity to leverage shares of multifamily rental properties into a passive monthly income. Learn More

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