Labor Market Recovery, Migration Patterns and Housing Affordability Impacting Investment Strategies in 2022

Sunbelt metros command top positions in the Index. Nation-leading rates of job creation and household formation characterize the markets that lead this year’s U.S. Multifamily Index. Orlando and Las Vegas claim the top spots by surpassing all other ranked metros in these two categories, in turn fostering outsized jumps in effective rent. High rates of rent growth, bolstered by robust in-migration, distinguish many of the top-performing metros in the Index, including Phoenix (#5), Salt Lake City (#6) and Austin (#7). Many coastal residents are moving to these metros for lower-cost living arrangements. Multiple major Florida markets also populate the top 10 for similar demographic reasons. Individuals, predominantely from the Northeast and Midwest, are relocating to the warmer climates of Fort Lauderdale (#3), West Palm Beach (#4) and Tampa (#8). Rapid hiring in Miami (#10) is also driving renter demand in the market, while strong pre-pandemic property performance and a relatively quick economic recovery place Atlanta in the ninth slot. Other metros favored with hearty population expansions, including Dallas-Fort Worth (#12), Charlotte (#13) and Raleigh (#15), sit slightly lower due to large construction pipelines that add short-term vacancy pressure.

Larger markets have more ground to make up, falling lower on the Index. The Bay Area metros of San Francisco (#25) and San Jose (#26) lie in the middle of the Index as the region continues to recover from the pandemic despite growing staff counts. Employers in tech-centric Seattle-Tacoma (#22) are also hiring, although a heavy development pipeline adds near-term pressure. Conversely, minimal building activity is benefiting Los Angeles (#23), where vacancy is also tight. Less new supply also aids renter demand in Indianapolis (#24), while Kansas City (#28) is distinguished among Midwest metros for its high rent growth. Uncertainty regarding the degree and speed to which companies and public agencies return staff to offices plays a prominent role in the positioning of Washington, D.C. (#33) and New York (#34) in the bottom half of the Index. As with the higher-ranked markets, demographics heavily factor into which metros fall into the lower bound of the Index. The populations of Chicago (#37) and Cleveland (#41) will mildly contract this year, while slow household and job creation places Pittsburgh at 46.

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