Report Released on Top 10 Multifamily Investment Markets to Watch
Published: November 09, 2007

By Lisa Iannucci, Correspondent

Dallas—The top multifamily investment markets to watch are Dallas/Fort Worth, Houston, Inland Empire in Southern California, Las Vegas, Phoenix, Raleigh-Durham, Sacramento, San Francisco, San Jose and Tacoma, according to Sperry Van Ness, a California-based commercial real estate brokerage firm. The company recently released the multifamily edition of its 2007 Top 10 Markets to Watch Report.


Sperry Van Ness analyzed more than 60 primary, secondary and tertiary markets, examining economic factors that impact future multifamily investment real estate. The market rankings were focused on dynamics including construction permits, multifamily starts, effective rent growth and net absorption. 

“It is important to review a matrix of forward-looking economic factors when deciding where to acquire property because they are key forward looking indicators of a property’s financial performance in the future,” Jerry Anderson, COO and president of national advisor organization of Sperry Van Ness, tells MHN. “Cap rate is only one small piece of the performance story.”

Each market selected for the report had distinct dynamics that helped it rise into the top 10.

Dallas/Ft. Worth’s strong position is due in large part to its projected 125,260 increase in residents in 2008. Houston’s average effective rents are projected to rise from $682 in 2007 to $706 in 2008, fueled by a job growth rate that is double the national average. 

Southern California’s Inland Empire continues to be one of the fastest growing regions in the nation at 2.5 percent expected in 2008, with average effective monthly rents projected to increase by a hefty 4.4 percent. 

Population growth for Las Vegas in 2008 is projected to be a substantial 3.9 percent, which blows away second place Austin’s projected 2.8 percent. Additionally, “America’s Playground” benefits from incredible tax benefit with no personal or corporate income, inheritance, gift, estate, inventory or franchise tax. 

With such notoriety as being ranked by Forbes as the second best U.S. city for jobs and strong fundamentals, Phoenix can expect average effective rent increases of 4.1 percent from $724 in 2007 to $754 in 2008. 

In the Raleigh-Durham region, apartment construction starts as a percentage of inventory are low causing apartment vacancy to drop by more than 4.4 percent to just more than 8 percent. 

With strong job growth in professional and business services, transportation, utilities and manufacturing, and government jobs, Sacramento can expect vacancy to tighten to 5.4 percent. 

In very few markets do renters make up such a majority of residents as they do for the city of San Francisco at 65 percent, attracting institutional investors as well as high net-worth individuals. 

Through 2009, a meager 900 apartment units are expected to be completed in San Jose, which will do little to quell a high demand for residences that is spurred by more than 14,000 newcomers expected in 2008 and a growing affordability gap for single-family housing. 

Tacoma continues to have strong fundamentals with household income growth expected to be 4.8 percent in 2008, ranking it third among our indexed markets.