The industry will add roughly 400,000 new rentals this year.
Marcus & Millichap is expecting the US to add roughly 400,000 new rentals in 2022, a record for the last few decades. Rental demand is anticipated to increase this year with rising interest rates and elevated single-family home prices.
“The new supply will play a key role in appeasing the housing shortage,” Marcus & Millichap predicts.
The Sun Belt is poised to account for one-fourth of the new units with Dallas-Fort Worth, Phoenix, Austin, Houston, Nashville, and Atlanta leading the way with each expected to add more than 10,000 units in 2022.
Migration to those metro areas is expected to combine to 250,000 new households this year.
Other Markets Still Intrigue
This is not to say that developers are focusing exclusively on these markets. At the recent GlobeSt.com Multifamily conference, investment professionals and experts explained where they are placing capital going forward.
Jerry Fink, the managing partner at the Bascom Group, says Las Vegas has the firm “most intrigued.” Fink likes the fundamentals, which include limited land for new development, a narrow new construction pipeline, and, the kicker, 10% rent growth.
The Colorado market, and specifically Denver, is also a favorite secondary market, according to Loryn D. Arkow, a partner at law firm Stroock, said. She added that she has seen client interest in Miami and other sunbelt cities, but said there is some concern that a bubble is looming in those markets. She is most confident in the northwest and Rockies.
In Arizona, Brian Tranetzki, principal and head of the multifamily at Taylor Street Advisors, said that Tucson was the most underrated market in the state. It is a discount compared to Phoenix, but there has been strong job growth and the economic growth drivers are equally as attractive.
The most unlikely market to make the cut: Albuquerque. It is the favorite underrated market of Jeff Adler, VP at Yardi Matrix. He called the market unloved, but said that it has strong fundamentals and has historically performed well with strong 7% rent growth.
David Harrington, EVP, and managing director at Matthews Real Estate Investment Services, and Fink are also bullish on core markets, and both like Los Angeles specifically. The Bascom Group is focused on what Fink called the doughnut around Downtown Los Angeles, neighborhoods like Boyle Heights. “We are finding tremendous demand for low-density, renovated two-story buildings,” Fink said.