Salt Lake City and Two California Multifamily Markets Could Rival Sun Belt

Salt Lake City, the Inland Empire and Orange County are emerging as strong options for multifamily investors looking for less competition and solid returns rivaling Sun Belt markets, according to a new analysis from CBRE.

Overall, private investors’ share of total multifamily investment increased to 30% in 2022 from 23% in 2019, while institutional investors’ share rose to 10% from 7%. And while the share of capital being invested in garden-style and mid-/high-rise properties has stayed steady, CBRE’s experts say “multifamily investors have redirected their geographic focus.”

In the past, six gateway markets have comprised roughly half of mid-/high-rise investment. However, “since 2018, Sun Belt markets have captured a growing share, peaking at 47% of all mid-/high-rise investment in 2021,” they say. “The balance was mostly in gateway markets, but the trend reversed slightly this year. For garden-style apartments, the shift has not been as pronounced. Prior to the pandemic, the Sun Belt accounted for 58% of garden-style multifamily investment, which has increased to 65% today.”

The analysts plotted the total investment per unit of inventory against the five-year annualized total return for more than a dozen cities, including Phoenix and Austin, both pandemic darlings, and say Salt Lake City, the Inland Empire and Orange County all fall below the trend line.

“The returns they have generated suggest they should have commanded a greater share of investment capital,” they say. “As multifamily fundamentals begin to normalize, these markets could provide an opportunity for investors looking for less competition and relatively strong returns.”