Top Three Multifamily Markets to Watch in 2023
As the real estate industry keeps a watchful eye on inflationary pressures, experts have identified these top three markets that can counter the expected uncertainty that multifamily development faces in 2023.
What makes these markets particularly resilient is a confluence of key factors that lenders, builders, and economists have identified – including the potential for recession-proof job market growth, the fostering of a builder-friendly development environment by localities, and overall population growth trends.
While the industry is poised for a slowdown in ’23, these three markets are likely to hold their own – and then some.
CHARLOTTE, NORTH CAROLINA
The Charlotte metropolitan region has much going for it… First, builder-friendly Mecklenburg County boasted over 14,300 new residential building starts in 2021, according to economic data complied by the Federal Reserve of St. Louis. The yearly total was the highest number of permits that were issued for residential construction going as far back as 1990 – and the figures in the region showed continued growth as the amount of permits issued steadily climbed year-over-year despite the pandemic.
Demographically, the Charlotte area continues to be well-positioned for growth, with Crexi data showing that over 40 percent of those living in the area are between the ages of 20 and 49, and a whopping 47 percent of the local housing inventory are rentals. Even with the pricing pressures of recent years, this metro market has remained vibrant – in 2022, there was nearly a 12 percent increase in average asking prices compared to the year prior.
POLK COUNTY, FLORIDA
The weather isn’t the only thing that is consistently hot on the southern end of I-95.
It’s no secret that the real estate markets throughout the Sunshine State have been steadily growing throughout the past decade, but Polk County has been a standout county in a standout state.
Polk County strategically sits between Orlando and Tampa and has continually attracted builders with affordable tracts of land and reasonable access to growing job markets.
Polk has the distinction of being both the fastest-growing county within Florida, and the overall fifth-fastest growing county in the U.S. According to Forbes, over 13,000 building permits were approved last year alone, and planners in Lake Wales are expecting the once-sleepy city’s population to triple in the next decade.
As of writing, there are no less than 30 projects within various stages of Lake Wales’ developmental pipeline, which local media outlets say collectively can add an additional 12,000 units of housing.
As one of the fastest-growing cities in the U.S., it would only follow that Nashville would be a market to watch in 2023. Both population and employment have increased by 2 percent year over year, fueling housing demand.
In the employment sector, Yardi Matrix is reporting that leisure and hospitality led gains (20,200 jobs), followed by Nashville’s largest sectors—professional and business services (14,400 jobs) and trade, transportation and utilities (11,600 jobs). In fact, Amazon and Oracle are among the companies that announced expansions in the metro.
According to Crexi, “over 40% of Nashville housing units are occupied by renters, with annual rents growing 9% year over year and 2-bedroom units earning a median rent of $1,845 per month.” The relative affordability of apartments has reached a record in Nashville, urging a growing number of developers to bet on future rental demand gains.
However, Freddie Mac’s 2023 Multifamily Outlook, cites Nashville as one of the metro areas expected to see the highest levels of new supply, leading relatively lower rent growth in the coming year, given the high level of new supply and higher vacancy rates.