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Multifamily Report: Huge Competition, Especially Among Secondary and Tertiary Markets
Pictured: Fayetteville, AR
A recent report released by RentCafe noted that South and Central Florida were “red hot” when it came to finding residential rental units, followed by mid-sized markets in the Northeast. Basing its findings on data from Yardi Matrix, the report noted that Miami-Dade County tops the list as the nation’s most competitive apartment market so far in 2022.
Then there are the secondary and tertiary markets (less than 20,000 units), where the competition for both single-family rental homes and apartment units is hot, if not hotter than their larger metro counterparts. Topping that list was Fayetteville, AR, with an occupancy of 98.1%, average vacant days of 15 and a lease renewal rate of 77%. Fayetteville’s growth is coming from Walmart’s large footprint in Northwest Arkansas, as well as an overall job boom in recent years. Still, “the growing number of renters have extremely limited options to choose from.”
Doug Ressler, Yardi Matrix’s Manager of Business Intelligence told Connect CRE that fundamentals driving huge demand/low supply in these markets include growth of remote work which “has many buyers prioritizing affordability over proximity to the workplace,” and the lack of for-sale homes priced at less than $300,000. This, in turn, is prompting migration to secondary markets. Added to this, “the rate of year-over-year single-family construction growth in small metro urban, suburban and rural regional submarkets also slowed in the first quarter,” he said.
Underlining this comment is Fayetteville’s share of new apartments, which stands at 0.9%.
Adding to the issue in both small and large metros involves both materials and workers. “Ongoing building material production bottlenecks have delayed or stalled home-building projects,” Ressler said. “Construction labor shortages are running near an all-time high of 400,000 workers. More recently, the rapid runup in mortgage rates have all combined to exacerbate the housing affordability crisis.”
Still, apartment construction growth is outpacing single-family building activities across all regional geographies. “Low rental vacancy rates and rising rents give multifamily developers confidence to continue building, despite rising costs for land, labor and materials,” Ressler said.
- ◦Lease
- ◦Economy
