There are a number of ways to determine the nation’s “top” multifamily markets. It all depends on one’s specialty or investment strategy. Even so, this ranking, based on late-2012 vacancy data from ReisReports, is a good place to start. Here are the Top 10 U.S. Multifamily Markets by Vacancy Rate:
10. McAllen, TX: 2.3%
9. Honolulu, HI: 2.3%
8. Fargo, ND: 2.3%
8. Once more, in case the enormity of the statement hasn’t yet sunk in: Fargo, ND: 2.3%
7. Bellingham, WA: 2.3%
6. Scranton/Wilkes-Barre, PA: 2.2%
5. Santa Barbara, CA: 2.2% (But seriously, did you notice Fargo, ND was Number 8?!)
4. Portland, OR: 2.2%
3. Carmel/Monterey, CA: 2.2%
2. New York, NY: 2.1%
1. San Luis Obispo, CA: 1.9%
These cities come from a list of the top 200 multifamily rental markets in the country.
It’s no surprise that a few key California markets received high ranks, nor that New York City came in at number 2 (actually, I expected it would place first, but assume this rank is because Reis took the city’s overall vacancy rate into account, rather than that of its most densely populated neighborhoods). The big surprises on this list are McAllen, TX and Fargo, ND (as I might have mentioned once or twice above).
While we can attribute the high apartment demand (and low vacancies) of many of these markets to the fact that they are bustling, economically diverse places, the hot multifamily markets of McAllen and Fargo result from something more specific. Each of these towns benefits, to an extent few others can, from a specific industry: for Fargo, it’s energy. For McAllen, it’s retail/trade.
Both of these markets benefit from some unique circumstances, which make their success difficult to replicate. McAllen, located in the Rio Grande Valley at the very bottom of Texas, enjoys a geographical location and duty-free shopping that make it an extremely popular destination for visitors from south of the border. As retail closures and vacancies remain high in the rest of the U.S., McAllen’s retail is growing more than ever (along with its demand for workers and residential real estate).
Even though no one (that I know of) actually wants to live there, North Dakota now has the fastest-growing population in the country according to the U.S. Census Bureau. The state’s oil boom and influx of new workers–largely associated with the town of Williston, ND–has created a severe housing deficit. Even as multifamily demand finally levels off in other parts of the country (a sign of recovery in the single-family sector, say analysts), dozens of multifamily projects are under construction in Fargo and other towns. If the state’s employment and population growth continue to climb, no doubt we’ll see developers break ground on many, many more.