The Top Markets for Multifamily Investors

With investment activity set to rise in the multifamily market as interest rates have begun falling, investors are searching for the best locations to deploy capital.

According to the Arbor-Chandan 2024 Multifamily Opportunity Matrix, Nashville, Phoenix and Austin are proving to be the top markets for multifamily investment with high rankings in affordability, population growth and climate. Affordable Midwest markets also performed well in the 2024 ranking, while many of the country’s largest cities finished lower.

Nashville’s No. 1 rating is due to its competitive tax climate, ability to attract renters from other metro areas, vibrant culture and bustling economy. The Tennessee capital saw its population grow 1.5% in 2023, about three times faster than the national average. The market benefits from the healthcare, technology tourism sectors, and its labor market had the lowest unemployment rate of all the 50 largest metros through July at 2.5%.

Phoenix’s dynamic labor market helped it climb to the second spot on the list. The city also decreased unemployment to 3.1% in July and has become a domestic semiconductor manufacturing hub, attracting skilled jobs that have reinforced local housing demand. Rent growth has slowed in the market amid increasing housing supply, but Arbor said rental vacancy rates across the metro have decreased over the past year by 3.4%.

Population growth in Austin has exceeded 2% for the past 13 consecutive years, a feat not accomplished nationally since 1960, the report said. With no individual or corporate state-level income tax in Texas, economic activity has blossomed in the city, attracting a growing number of young people. Austin has an above-average share of renters under 35 years old.

Other markets on the highest-performing list were Jacksonville, Dallas, Raleigh, Indianapolis, Kansas City, Columbus and San Antonio.

Analyzing investment sales and refinancings from July 2023 to June 2024, Arbor determined that Denver had the highest total multifamily lending volume during the period relative to its population at $136.85 per person. Columbus and Phoenix followed and Austin, Memphis, Raleigh, Dallas, Orlando, Tampa and Chicago made up the top 10.

In terms of affordability, Oklahoma City led the country with an average monthly rental price of $1,366 through July 24. At that level, households earning $54,624 or more are not considered rent-burdened in the market. Buffalo was a close second, and Milwaukee, Louisville and Birmingham rounded out the top five. At the other end, New York renters must earn $139,724 to avoid being rent-burdened, San Jose renters must make $138,978 and San Francisco renters need to bring home $125,286.

Arbor also evaluated the markets at most risk for climate-related exposures, including earthquakes, extreme heat and wildfires. Los Angeles was rated as the most hazard-prone metro among the top 50, followed by Riverside, California, and Miami. Several Midwest and Rust Belt markets, including Pittsburgh and Buffalo, were among the least exposed to hazards.