5 Unexpected Markets Leading in Multifamily Sales Growth

Recently, we published our National Multifamily Investment Sales Report which provided an overview of the market’s general performance over the past nine years. While 2019 has been an incendiary year for the asset class as a whole, our data indicates capital is especially flowing in secondary and tertiary markets where demand is burgeoning and yields are expanding. Unsurprisingly, investors and developers are looking past saturated primary markets to non-traditional regions where economic shifts are making opportunity abundant.

In fact, Reonomy data shows the top five Metropolitan Statistical Areas (MSAs) for growth in transaction volume are Indianapolis, Syracuse, Cincinnati, Phoenix and Houston—all non-traditional/secondary markets with strong, or developing, economic fundamentals.

Why is attention turning to these markets? Below, we dive deep into each MSA to explore where commercial real estate professions are deploying capital and the impact their efforts are having on each region.

Indianapolis MSA

Indianapolis tops the list of our fastest growing markets. The MSA, which includes Carmel and Anderson, has grown significantly over the past nine years, both in population density and development. Indianapolis was even an HQ2 contender, likely for its Midwestern hospitality, affordability and access to the rest of the country as America’s heartland.


While our data indicates net new multifamily development has slowed, sales activity has steadily increased since 2010, likely a result of the region’s flourishing job market. According to Fannie Mae, Indianapolis’ job market expanded by 1.9 percent at the end of last year, landing slightly higher than the national rate of 1.8 percent. Investment is particularly prominent downtown, most likely to accommodate the 22,900+ jobs that have been added over the past 12 months.

Given the city’s various tax incentives available to businesses, including the Headquarters Relocation Tax Credit and Data Center Tax Exemption, it’s no wonder companies and young professionals are flocking to Circle City. It’s also no surprise that the CRE community is jumping at the chance to invest in Indianapolis’ multifamily market and capitalize on the city’s population surge. And, given the region’s competitive market rates (just under $1M in 2018), Indianapolis will likely continue to attract capital throughout 2020.

Syracuse MSA

Historically, Syracuse, New York has been a “meds and eds” hub for investors and developers. The city is home to a plethora of educational and medical institutions, including Syracuse University, SUNY Upstate Medical Center, and University Hospital. But, according to our data, ‘Cuse is crawling with multifamily action.

Reonomy data shows new multifamily development has slowed since spiking in 2016, but like Indianapolis, the number of transactions in the area has firmly increased over the past nine years. Why? The city’s “eds” may have something to do with it.

Home to more than 30,000 students, Syracuse is notorious for its tax breaks on student housing which is certainly driving activity. According to Syracuse.com, “the three most recent apartment complexes, which opened last fall… will save more than $42 million combined over the next 12 years in avoided property taxes and other incentives.” The more historic duplexes and independent multifamily homes that line the city are attractive for investors, too. Especially at an average sales price that’s under $200,000, the reasoning for investing in Syracuse is certainly justifiable. 

Cincinnati MSA

The third fastest-growing market is the Cincinnati MSA, which also happens to be the largest MSA in all of Ohio and spans three states (five counties in Ohio, seven in Northern Kentucky, three in Southeast Indiana.) Cincy has held strong in recent years. The city’s economy topped $138 billion in 2017, outpacing entire U.S. growth. The area’s unemployment rate is also low (3.7%) and the labor market is strong, having added 27,000 jobs between 2018 and 2019.


Reonomy data indicates that the multifamily market is on the rise; sales from 2018 almost tripled the amount of recorded sales in 2010 (2,194 to 8,849) It’s probable that the region is garnering attention for its strong labor pool, low cost of living, and quality of life offerings. It’s also likely the area’s large millennial population is driving market activity—a 2018 survey conducted by SmartAsset reported Cincinnati gained around 4,420 new millennials over the course of the year. As homeownership amongst millennials decreases and average multifamily prices continue to stay relatively low, Cincinnati’s strong market will likely fortify in years to come.

Phoenix MSA

Multifamily blazes in the Valley of the Sun. According to 2019 Census Bureau data, the fourth fastest growing multifamily market is also the third overall fastest growing American economy. It was also announced in September that apartment investment and development is white hot throughout the MSA, contributing $53.8B to Phoenix’s local community.

Our data indicates development has had a large hand in Phoenix’s multifamily boom. While net new development was low in other MSAs, it actually increased and was sustained from 2010 to 2019 in Phoenix. Why? CRE companies aren’t blind to the area’s economic shifts—as home prices in Phoenix, Mesa and Scottsdale skyrocket, more and more people are turning to renting. In fact, 37% of Phoenix’s residents currently live in apartment buildings, condos, and other multifamily buildings.

The growing economy means multifamily prices are soaring, too. While Indianapolis, Syracuse and Cincinnati had average sales prices well under $1M, Reonomy data shows that average multifamily property prices in Phoenix have fluctuated between $1.5M-$1.9M over the past four years. But that’s not stopping investors. A number of economic indicators, like employment expansion and net migration projections, will likely spur activity throughout the upcoming year.

Houston MSA

Finally, Houston rounds off our list of the top five fastest growing multifamily markets. The Houston MSA, which encompasses The Woodlands and Sugar Land, is home to the third most populous single county in the country: Harris County. It’s also a hub for employment, with approximately 80,000 jobs added on a year-over-year basis. The labor market is especially strong across the health and life science industry, which reportedly drives $48B annually. Combined, this makes Space City a focal point on the CRE community’s radar, particularly for multifamily opportunity.

Although Hurricane Harvey caused the city setbacks in 2017, the market has certainly rebounded; In July, the Houston Chronicle reported that vacancy rates, especially in Class C housing, have hit a historic 20-year low. CBRE also reported that “year-to-date net absorption reached 10,094 units, which means Houston has already in two quarters absorbed more units than it had all of last year.”


It’s clear the multifamily market is a star performer in Houston. Reonomy data reports that investment activity has increased over the past eight years, more than doubling since 2010 (719 to 2,554). Although our data shows new development has declined, the city’s absorption and occupancy rates definitely indicate a growing need. Given its performance to date, it’s very possible the market continues its bullish trajectory throughout 2020.

In Summary…

While primary markets were the CRE industry’s darlings for many years, that’s no longer the case.

Times are changing: macro and microeconomic shifts are causing companies and individuals to look past big players like New York, Chicago and Los Angeles, into smaller, more affordable areas. There is certainly opportunity calling in these secondary and tertiary markets, and it’s clear multifamily investors and developers are eager to answer that call. It’s only a matter of time before we see whether or not this traction continues throughout 2020, but given the success of 2019, another strong year for multifamily might be on the horizon.

To learn more about the multifamily market in Opportunity Zones, read our full 2019 analysis here. 

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