With the demand for rental housing on the rise, multifamily investment has become increasingly attractive for real estate investors. Certain markets stand out for their strong multifamily fundamentals, offering higher yields, greater appreciation potential, and more stability. When evaluating the best places for multifamily investment in 2022, key factors to consider include population and job growth, rental demand and occupancy trends, new construction pipeline, and market size and liquidity. Strong economic and demographic tailwinds, coupled with tight supply conditions, are creating favorable risk-adjusted returns in multifamily investment markets like Phoenix, Austin, Charlotte, Atlanta, and Dallas. These fast-growing Sun Belt cities boast affordable home prices, business-friendly policies, and a steady influx of new residents, making them prime targets for multifamily acquisitions and development.
Phoenix Multifamily Market Sees Incredible Rent Growth and Strong Demographics
Phoenix has emerged as one of the top-performing multifamily investment markets, owing to its rapidly expanding population, diversified economy, and limited new supply. According to RealPage, asking rents in Phoenix rose by over 25% in 2021 while occupancy remained tight at 95%. The metro added over 130,000 new residents in 2021, well above the U.S. average. Phoenix also benefits from a strong job market across various employment sectors like technology, finance, tourism, manufacturing, construction and healthcare. The unemployment rate stands below 4% as of January 2022. With home prices and mortgage rates on the rise, demand for rentals remains robust. These positive fundamentals are driving continued rent growth, NOI expansion, and value appreciation for Phoenix multifamily assets, especially Class A properties which can achieve cap rates below 4%.
Austin’s ‘Silicon Hills’ Technology Sector Attracts Companies and Residents Alike
With tech giants like Tesla, Apple and Google expanding operations, Austin has cemented itself as an emerging tech hub. This is drawing in young skilled professionals from across the country, fueling Austin’s population boom. Austin’s population expanded by over 60,000 in 2021, almost double the previous decade’s average. Supported by a diverse tech, business services, government and education base, Austin’s unemployment rate stands at just 2.8% as of December 2021. With home prices spiking over 30% in 2021, renting provides a more affordable option for Austin’s burgeoning millennial population. Class A apartment communities in the urban core continue to push rents past pre-pandemic levels. Investors are taking note of Austin’s compelling multifamily dynamics. According to Real Capital Analytics, Austin saw over $5 billion in multifamily transactions in 2021, with cap rates averaging in the low 4% range.
Charlotte Benefits from Financial Services Growth and Affordability
Charlotte’s strong multifamily fundamentals stem from its booming financial services industry, business-friendly policies, mild climate and affordable cost of living relative to other major metros. Charlotte added over 24,000 new residents in 2021, and employment expanded across sectors like Finance, Technology and Healthcare. Healthy demand against modest new supply has led to falling vacancies and robust rent growth. According to RealPage, Charlotte rents grew 10% in 2021 while occupancy exceeded 95% across all classes. Investors are flocking to Charlotte’s multifamily market, with over $5 billion in transactions in 2021 based on Real Capital Analytics data. Cap rates currently average in the low-to-mid 4% range for Class A assets, reflecting Charlotte’s attractive risk-return profile.
The Major Atlanta Multifamily Market Sees Strong Leasing Activity
Driven by an expanding tech, entertainment and corporate presence, metro Atlanta population swelled by over 73,000 residents in 2021. Atlanta unemployment remains below national average at 3.1% as of December 2021, supporting multifamily demand. While new deliveries surpassed 15,000 units in 2021, elevated absorption resulted in stable occupancy of 94%, per RealPage. Class A asking rents rose nearly 15% for Atlanta in 2021. Investors took note, buying up over $7 billion worth of multifamily product according to Real Capital Analytics. Core urban submarkets like Midtown and Buckhead saw average cap rates in the 3% range amid fierce competition for premium Class A assets.
Job Growth and In-Migration Power Dallas Multifamily Performance
With housing affordability eroding, more residents are renting in Dallas-Fort Worth metroplex. The region added over 97,000 new residents in 2021, well above the historical average. Corporate relocations from states like California are likely to further boost DFW population and employment over the long term. The unemployment rate stands at just 3.7% as of December 2021. RealPage data shows Class A asking rents rose by 12.5% in 2021, while occupancy remained stable at 94%. Investors responded by transacting over $6 billion in multifamily acquisitions during 2021 based on Real Capital Analytics data. Core Dallas assets traded at sub-4% cap rates as investors priced in strong NOI growth prospects.
Driven by positive demographic and economic trends, coupled with disciplined supply conditions, markets like Phoenix, Austin, Charlotte, Atlanta and Dallas represent attractive multifamily investment opportunities. With skilled jobs and corporate activity decentralizing to the Sun Belt, these high-growth markets are likely to see ongoing migration and housing demand. Multifamily fundamentals remain favorable in these cities, with rent growth and occupancy resilience driving NOI expansion and asset appreciation over the medium term. Investors should capitalize on tight cap rates and rising rents by targeting multifamily acquisitions and developments in these top markets while also evaluating risks such as new supply pressures, regulations, or an economic downturn.