Five Apartment Markets Likely to Overheat

Phoenix, Raleigh-Durham, Las Vegas, Tampa and Denver are to be considered the most likely apartment markets to overheat in the coming months, according to Kimberly Byrum, Principal-Multifamily, Zonda Advisory, who presented Tuesday at the MFE Conference hosted by Zonda in Las Vegas.

She said that high occupancy is driving unprecedented rent growth in asking rents, primarily on new lease activity. “Will it hold?” Byrum said. “Let’s see how many leases are being signed at these rates?”

Other than growth in the single-family housing market in Phoenix, builders are not increasing production of new homes at a fast pace, Byrum said, which could further impact apartment demand and put more pressure on rents, especially in Raleigh-Durham, Las Vegas and Tampa.

As apartment construction tries to resume in most of the country, Byrum said that the length of Phoenix’s pandemic lock down was on the shorter side, therefore, “that market had a head start when it came to returning to construction normalcy.”

She also shared some random questions that her clients said “are keeping them up at night.”

• Will Dallas (and Houston) ever kick its concessions habit? Both markets make me insane. Why still the concessions – as much as three months’ worth in urban Houston – given it’s a strong market and when almost all have revenue management in place? 
• What is the Inland Empire? It’s a great market, that’s what. Developers here always do well. There are so many people living here who have high-quality jobs in strong industries.
• Will large merchant builders ever return to Las Vegas? That’s to be seen, but I do know that are great communities here, one in Tuscan Highlands has a sports book inside its community; and it’s beautiful, the owner hand-picks his own palm trees.
• Finally, what we’re seeing for resident turnover rate right now is a number in the low 50s. It’s not like the 65 percent rates we were used to seeing.