Smaller Apartment Markets Become a Great Investment Opportunity

Due to work-from-home and hybrid work options and the appeal of more affordable lifestyles, many people have left big cities behind and are calling less costly, less congested smaller markets home. In such places, the desire for a work-play balance becomes more of a reality than just part of a wish list.

And where are all these people moving and living, not to mention investment dollars flowing/? Dozens of small markets nationwide, according to July 2023 stats from RealPage Analytics. 

It reports that smaller markets are the only ones out of 150 markets surveyed that registered investment growth over the past year. Moreover, of the 19 markets that achieved an investment dollar volume increase year-over-year, all but three were small markets.

At the top of the list for annual change and a staggering 2,672% increase YoY, was Midland/Odessa, Texas, with more than $125 million in apartment transactions. The reason for this huge surge may be its location where the “energy” economy is dominated by oil and gas production, though that has posed some downside, too. At No. 2 was Salisbury, Md., close to Washington, D.C., and Baltimore with a 609% growth YoY. It experienced $58.5 million of apartment deals transacted in that same period, which the report indicated was important for a city with a population of just under 415,000 people. 

The next tier of markets saw investment dollar volume increase closer to the 100% to 200% range and included Spokane, Wash., Madison, Wis., Buffalo, N.Y., Shreveport, La., San Jose, Calif., and Eugene, Ore. San Jose was one of the three large markets that made the top 20 list.

Some of these markets are located within a commutable distance from a larger metro, yet they are also big enough to be self-contained with amenities and other positive factors. Madison, for example, has a big university with many activities and a reputation as one of the country’s best college “towns,” plus accolades for its bucolic charm. 

Buffalo, often maligned because of its bad snowy weather, offers numerous positive reasons to live there: the country’s largest residential garden tour each July that’s free; a recently remodeled art museum, the Buffalo AKG Art Museum; Buffalo Botanic Gardens; Frederick Law Olmsted designed park; several Frank Lloyd Wright homes turned museums, and Midwestern charm as its state’s farthest Western city. It also has an affordable housing inventory for those who want to invest in homes rather than go just with apartments. 

The next six markets on the list–New Haven, Conn., Omaha, Neb., Manchester, N.H., Lubbock, Texas, Little Rock, Ark., and Springfield, Ill.—all achieved investment growth of closer to a strong 10% to 40% YoY. Here, too, there are countless advantages to living and investing in these markets. New Haven is home to Yale University with a top medical center and school; Little Rock’s main museum, the Arkansas Museum of Fine Arts, just gained an overhaul by starchitect firm, Studio Gang, and the city also counts the William J. Clinton Presidential Library among its attractions. 

Cincinnati appeared at No. 15 as the second of three large markets that experienced an increase in investment dollar volume with a strong gain of 9.2% over the past year. Stockton, Calif., Wichita, Kan., Naples, Fla., Milwaukee, Wis., and Salinas, Calif., finished the list, with Milwaukee appearing as the last of the three large markets that saw investment growth.