10 Smaller Markets That are Ripe for Multifamily Acquisitions

Raleigh-Durham leads the way as the nation’s top market for multifamily acquisitions, according to a new report from CrowdStreet.

There are, in fact, a number of smaller-sized cities that are ripe for apartment acquisitions, the report finds, as renters have moved en masse to these markets, abandoning pricey urban centers and coastal cities for the suburbs, the Sun Belt, and secondary gateway cities. 

Like their larger counterparts, smaller cities’ multifamily fundamentals have remained relatively stable thanks to government stimulus and eviction moratoriums that have kept rent collections near pre-COVID levels. Collections never dropped below 93% in 2020, according to the National Multifamily Housing Council, helping to push vacancy rates for suburban multifamily product lower (to 6%) and downtown vacancy higher (to 9%). This was reflected in last year’s investment flows with 75.8% of multifamily investment happening outside of major metros, according to Newmark.

The overall outlook for these markets remains positive, according to CrowdStreet, especially as interest rates remain low and single family values have spiked. The firm has a “strong conviction for 18-hour cities in growing secondary markets” that have favorable business climates, a strong stable of educated workers, and affordability.  

These are the top 10 markets for multifamily acquisitions, according to CrowdStreet:

1. Raleigh-Durham: The city was CrowdStreet’s “clear #1 market” for 2021 and ranks third or better across four criteria. CrowdStreet cites its proximity to top universities, world class research facilities, a highly educated workforce, relative affordability, and its increasingly walkable urban center as reasons to be bullish about the city’s future, “arguably one of the nation’s hottest ‘work from anywhere’ markets.” 
2. Austin: CrowdStreet says Austin has an “unfair number of competitive advantages,” including strong job growth, a thriving tech sector, the Texas state capitol, a major research university, and location within a tax-free state. 
3. Charlotte: Banking powerhouse Charlotte is also home to nine Fortune 500 HQs, including Honeywell, Nucor, and Duke Energy, and CrowdStreet deems it a “quintessential 18-hour city market with above-average population and job growth rates.” 
4. Salt Lake City: Consistent population growth, low unemployment, and tight vacancies are perennial attributes of this market. Salt Lake City is maturing and becoming more institutional in nature. 
5. Phoenix: CrowdStreet’s top market in the West has been bolstered by a 2020 exodus from urban locations within California. 
6. Atlanta: The sprawling city is home to the world’s busiest airport, the highest concentration of colleges and universities in the Southeast, and a highly educated workforce. “Atlanta may still classify as a secondary market, but it’s well on its way to attaining primary market status,” according to CrowdStreet.
7. Dallas-Fort Worth: DFW is technically a “land unconstrained market,” so the possibilities are pretty endless for consistent growth. That potential, combined with a business friendly central location and a favorable tax environment provide strong underlying fundamentals for multifamily. 
8. Orlando: Orlando’s status as the #1 tourist destination in the U.S. was hampered by COVID-19, but CrowdStreet expects recovery to begin in the second quarter. The city is also home to one of the nation’s largest universities, the University of Central Florida. 
9. Nashville: Nashville ranks as one of CrowdStreet’s top markets from a 10-year growth perspective, with the firm predicting Music City will recover and reach record levels of visits in the near term. Multifamily rents continue to grow at 4% year-over-year. 
10. Tampa-St.Petersburg: This Sunbelt city is attractive across every major asset class, owing in part to strong population growth, no state income tax, a business friendly environment, and affordability.