Where Apartment Investors Are Placing Capital

The pandemic shook up the traditional list of top apartment investment markets. In the last year, long time favorites, like San Francisco and New York City fell off of the list, while secondary cities like Nashville, Raleigh, Miami and Austin are new favorites. But, at the recent GlobeSt.com Multifamily conference, investment professionals and experts diverged from the standards.

Jerry Fink, managing partner at the Bascom Group, says Las Vegas has the firm “most intrigued.” Fink likes the fundamentals, which include limited land for new development, a narrow new construction pipeline and, the kicker, 10% rent growth.

The Colorado market, and specifically Denver, is also a favorite secondary market, according to Loryn D. Arkow, a partner at law firm Stroock, said. She added that she has seen client interest in Miami and other sunbelt cities, but said there is some concern that a bubble is looming in those markets. She is most confident in the northwest and Rockies.

In Arizona, Brian Tranetzki, principal and head of multifamily at Taylor Street Advisors, said that Tucson was the most underrated market in the state. It is a discount compared to Phoenix, but there has been strong job growth and the economic growth drivers are equally as attractive.

The most unlikely market to make the cut: Albuquerque. It is the favorite underrated market of Jeff Adler, VP at Yardi Matrix. He called the market unloved, but said that it has strong fundamentals and has historically performed well with strong 7% rent growth.

David Harrington, EVP and managing director at Matthews Real Estate Investment Services and Fink are also bullish on core markets, and both like Los Angeles specifically. The Bascom Group is focused on what Fink called the doughnut around Downtown Los Angeles, neighborhoods like Boyle Heights. “We are finding tremendous demand for low-density, renovated two-story buildings,” Fink said.

Overall, the streaming wars are also driving entertainment industry and job growth, which is supporting demand for housing. Fink forecasts a content revolution, and that will only support demand in multifamily.

Los Angeles does have its challenges, and most of them are legislative issues, namely the eviction moratorium. Both Fink and Harrington said that the city has essentially told renters that they don’t have to pay rent. Still, rent collections have over-performed. According to Harrington, even with the regulatory concerns, Los Angeles has a supply-demand imbalance that will continue to benefit property owners.