The Best Cities to Buy Multifamily Property in 2022

Reading Time: 6 minutes

Improving economic conditions, the loosening of restrictions, and the wide availability of the COVID vaccine have put multifamily property back on the radar of commercial real estate investors. Overall, the multifamily market has endured remarkably, with investors looking for new investing opportunities in multifamily property in 2022.

Multifamily as an Attractive Investment Class

National multifamily occupancy rates are at record levels, with many apartment markets across the country seeing a strong increase in rents. According to RealPage, nationwide effective asking rents have increased by 8.3%, the greatest gain since 2010. While rent growth may not be as robust going forward, demand for multifamily investments is predicted to remain strong in 2022.

Some of the best performing multifamily markets between 2022 and 2023 include Boise, Phoenix, Worcester, Tucson, and Salt Lake City, with projected rent growth of 12% or more. On the other hand, Northeast markets such as Philadelphia, Pittsburgh, and Harford are predicted to see rent growth of 6% or less between now and 2023.

Top Cities for Multifamily Investing in 2022

As RealPage reports, 15 multifamily markets are expected to see rent increases of 10% or more in 2022 and 2023, with apartment markets in the West such as Boise, Phoenix, and Tucson leading the way. 

As the recovery continues, some multifamily markets will outperform others. The most recent Emerging Trends in Real Estate report by PwC and the Urban Land Institute lists the top US multifamily markets with the highest buy ratings based on current performance and long-term fundamentals.

#1 Inland Empire

The Inland Empire consists of the Riverside-San Bernardino-Ontario, CA metro area and is classified by Emerging Trends as an established market adjacent to the nearby high-cost market of Los Angeles. Multifamily investments in the Inland Empire are benefitting from in-migration from neighboring LA.

The population of the Inland Empire grew by 0.61% last year, with the metro area home to 4.65 million residents. Of the nearly 1.6 million housing units, 36% are occupied by renters paying an effective monthly rent of $1,821. The vacancy rate is just 1.9%, and just 3,447 units are currently under construction. Rent takes up 20.3% of the 2-person annual wage income in the metro area, where median household income is $70,954.

#2 Raleigh/Durham

Also known as the Triangle, the multifamily market’s performance in Raleigh/Durham remains relatively stable as positive net absorption and new supply lure investors to this top-performing market. 

The region’s population of more than 2 million grew by 2.10% year over year and is likely to continue its fast trajectory. Of the nearly 863,000 housing units on the market, 36% are renter-occupied with more than 11,000 multifamily units under construction.

The average rent was $1.31 per square foot per month, growing 8.3% year over year. Median household incomes are $73,654, with a per capita income of $38,760.

#3 Salt Lake City

Strong economic fundamentals and better yield spread than neighboring states fuel the multifamily market’s investment growth in Salt Lake City. The city is home to a population of over 1.2 million with 0.83% annual growth. 

Cap rates and transaction sales price per unit illustrate the strong investor demand for multifamily in Salt Lake City. Over the past year (Q3 2020 to Q3 2021), cap rates have declined from 5.0% to 4.2%. Also, the sales price per multifamily unit has increased from $192,424 to $194,216. 

The median household income in Salt Lake City is $80,196, and per capita income clocks in at $34,445.

#4 Boise

Although apartment rents in Boise have declined slightly  this year, they have risen by more than 26% over the past three years. Boise’s metro population is shy of 750,000 and 224,300 within the city limits at most recent measures, growing by 2.29% year over year.

About 38% of the 289,731 housing units in Boise are occupied by renters, pushing vacancy rates down to just 3.8%. Effective asking rents per multifamily unit are $1,399, an increase of 15.9% year-over-year, with rent taking up 17.2% of 2-person annual wage income.

#5 Orange County

Employers in Orange County are bringing workers back at a rapid pace, helping to keep the demand for multifamily housing strong. Located just south of Los Angeles, nearly 3.2 million people live in the metro area, including major cities like Anaheim, Huntington Beach, and Irvine.

Although the vacancy rate has inched up to 3.8%, asking rents have increased by more than 5.5% year-over-year and currently stand at $2,075 per month. Investor demand for multifamily property in Orange County remains strong, with cap rates down to an average of 3.8% at a median sales price per unit of $351,200 year-to-date.

Of the more than 1.1 million housing units in the metro area, 43% are occupied by renters. The median household income in Orange County is $95,935, about 20% higher than the amount in California.

#6 Charlotte

Steady fundamentals keep the multifamily market in Charlotte healthy, with a diversified economy helping the market remain healthy. The city’s 2.6 million population grew by 2.63% from last year. Currently, nearly 1.1 million housing units are on the market, with 35% renter occupation and 6.4% vacancy as of Q3 2021. Developers delivered 10,511 units over the past 12 months, with another 10,790 units under construction. 

Effective asking rents per unit are $1,423, an increase of 1.8% year-over-year. While multifamily rents in Charlotte are rapidly rising, housing is still relatively affordable. Rent as a percentage of 2-person annual wage income is just 14.5% in the metro area, where median household income is $66,399, about 20% higher than in North Carolina.

#7 Washington, DC-Northern VA

The Northern Virginia suburbs of Washington, DC, are a leading data center hub for companies such as Amazon Web Services, Google, and Microsoft, helping to keep the job market growth and the demand for housing strong. Home to nearly 6.3 million residents, the metro area population has grown by nearly 0.5% over the past year.

About 36% of the 2.4 million housing units in the market are occupied by renters paying an effective rent of $1,944 per month. Over the past year, rents have increased by 10.1%, and vacancy is just 6.4%, down from 7.9% one year ago. More than 13,450 units were delivered to the market in the past 12 months, and another 30,384 are under construction. The median household income is $105,659, about 40% higher than the Virginia average.

#8 San Antonio

Although the recession impacted the San Antonio apartment market, multifamily effective rent growth in the city still remains stable and nearly 15% above the national average.

San Antonio’s metro population is over 2.5 million and has grown by 1.31% in the last year. Demand for rental property in the market remains strong, with 37% of the 914,421 housing units occupied by renters. 

Vacancy rates have declined from 9.6% to 6.3% over the past year, driving effective rent prices up by 13.3% year-over-year. Multifamily rents in San Antonio are $1,157 per month, fitting into most households’ median income of $62,355. Nearly 11,000 units were absorbed over the last 12 months, with another 7,265 units currently under construction. 

#9 Fort Lauderdale

Emerging Trends describe Fort Lauderdale as an 18-hour magnet city and a migration destination for both people and companies. Home to nearly 2 million residents, the metro area population has increased by over 10.6% since the most recent census. 

Of the 828,571 housing units in the market, 38% are occupied by renters paying an average rent of $1,735 per month. Rent prices have increased by 11% year-over-year, and the vacancy rate is down to 4.3% versus 6.7% in Q2 2020. Nearly 8,900 units were absorbed over the past 12 months, and over 27,500 units are currently under construction. The median household income in the metro area is $61,502, and per capita income is $34,357.

#10 Orlando

Orlando is the only niche market to make the top 10 list from Emerging Trends. Although niche markets are generally smaller and less economically diverse, they have a dominant economic driver that supports growth, such as visitor and convention centers in the Orlando metro area.

Home to over 2.6 million residents, the population of Orlando grew by nearly 1.4% over the past year. During the last 12 months, median household income increased by 5.6% to $61,875, while the job market grew by nearly 3.6%.

Multifamily vacancy rates in Orlando are down to 5.1% versus 9.5% in Q3 2020, while effective rents grew by 22.7%, to $1,601 per month. Over the past 12 months, 15,260 units were absorbed, and another 12,647 are currently under construction.

Things to Know Before Investing in Multifamily 

As recovery continues, the demand for rental property is expected to grow rapidly in 2022. According to CBRE, vacancy rates and cap rates will decline over the next year, with rents exceeding pre-crisis levels by Q2 2022.

There are several considerations investors should keep in mind when analyzing the best cities for multifamily in 2022:

  • Cities heavily dependent on tourism, hospitality, and retail may see income and employment levels rise at a slower pace.
  • Many renters are uncomfortable taking public transit, helping to drive the demand for multifamily property in suburban areas and smaller secondary and tertiary cities.
  • Living space and outdoor space will continue to be desired as more people work from home.
  • Millennials are slowly trading urban living for less-dense housing options in submarkets and the suburbs.

Although the multifamily market has held up well, many investors are still sitting on the sidelines. As the economy begins to recover and the pandemic is brought under control, institutional and value-add buyers should become much more active next year, with foreign buyers also increasing their investment activity in the US.

Ready to discover your next multifamily property?

Similar Articles

Shanti Ryle

Content Marketing Manager

Shanti leads Crexi's content marketing strategies with 7+ years of content development experience, creating everything from blog posts to award-winning podcasts. Previously, she worked on content teams at Snapchat, Weedmaps, and HopSkipDrive as well as developed copy, articles, and media for freelance publications.

Share This Article