What do Phoenix, Tucson, Las Vegas, Austin and Nashville have in common? Their job markets are robust and increasingly diverse, and their local and state governments are encouraging ambitious development while retaining each city’s unique personality and amenities. Their populations are growing, too – people are flocking to these areas, attracted by employment opportunities and the four-season lifestyles possible in these Sun Belt locations.
They also have something else in common: They are the five markets selected as our Multifamily Markets to Watch 2022. We believe these city areas offer high-potential opportunities for multifamily real estate investing that will continue at least through 2023.
Read more about the markets, and how we arrived at this list, below. Download the Multifamily Markets to Watch 2022 report here.
Phoenix: California Lifestyle Without the Cost
- MSA population growth 2020-21: 1.61%
- Job growth 2020-21: 5.35%
- Rent growth 2020-21: 27.12%
Affordability is driving companies and people to Phoenix, which is considered a lower-cost, tax-friendly alternative to California with similar weather and year-round lifestyle. National retailers seeking more affordable industrial and warehousing space still have more than 33 million people within a one-day truck haul of the city. Three electric-vehicle startups – Lucid Group, Nikola Corp. and ElectraMeccanica – are aiming to turn the area into a center of auto manufacturing, along with Korea’s LG, which plans to build an electric-vehicle battery plant in the area. Taiwanese semiconductor giant TSMC is investing in a $12 billion plant in northern Phoenix. U.S.-based Intel has a $20 billion plan to expand on its chip-manufacturing facilities in Chandler, southeast of Phoenix, expected to go online in 2024.
Multifamily outlook: A steady influx of jobs and people have tipped the supply-demand balance in favor of multifamily housing, with strong submarkets. We have invested in Phoenix, and we foresee affordability continuing at least into next year.
Tucson Grows in Stature, Maintains Affordable Profile
- MSA population growth 2020-21: 0.62%
- Job growth 2020-21: 4.33%
- Rent growth 2020-21: 20.28%
Tucson is just close enough to Phoenix to capitalize on the proximity to Arizona’s capital without ceding its distinct identity or its affordability compared to its bigger counterpart. The city offers access to state financial incentives to attract big companies and the high-quality jobs that come with them. Companies like Caterpillar, which brought a regional headquarters to the city in 2017, along with about 600 jobs, and Leonardo Electronics, which is investing $100 million investment in a new semiconductor laser manufacturing facility expected to add 170 jobs, having been taking those incentives. Economic initiatives build on big employers in defense, state and local governments, a nearby U.S. Air Force base and health care companies. A proposal to fund a passenger rail route could get funding from last year’s federal infrastructure bill.
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Multifamily outlook: We don’t currently invest here; but we are studying the market and seeing several high-potential pockets that underline a strong growth trajectory in multifamily rents.
Las Vegas Building Diverse Business Base
- MSA population growth 2020-21: 0.84%
- Job growth 2020-21: 7.08%
- Rent growth 2020-21: 26.18%
After the financial crisis of 2008 and the COVID-19 pandemic tanked tourism, Las Vegas has redoubled its efforts to diversify beyond entertainment, even as it set records in pre-tax gambling revenue in 2021. The Las Vegas Global Economic Alliance aims to attract industries such as health care, business and financial services, logistics and information technology. A $327 million manufacturing facility southeast of the city is on tap, along with the estimated $1 billion Gemini Solar Project, a solar-energy project scheduled for completion in 2023. Tourism still matters, though: An $8 billion high-speed rail project between Los Angeles and Las Vegas breaks ground next year, and three hotel and casino projects totaling $4.7 billion will be completed in the next two years. With about one-third of the population working in that 24/7 industry, there’s no real rush hour, so it’s easy to reach the often-overlooked natural beauty outside the metro area. All that is encouraging younger job seekers to plant roots in the area.
Multifamily outlook: We intend to study Las Vegas as a target for investment because of the high potential for growth after being undersupplied for the better part of a decade.
Austin Shows No Signs of Cooling
- MSA population growth 2020-21: 2.32%
- Job growth 2020-21: 7.91%
- Rent growth 2020-21: 24.23%
Austin’s high tech, strong demographics and attractive leisure options – and no individual income tax – are keeping it hot. Software giant Oracle moved its HQ there from California in 2020. Tesla broke ground on its Gigafactory east of the city in 2020, and it’s now HQ for the electric carmaker. Korean electronics giant Samsung will build a $17 billion semiconductor factory nearby, and Apple is opening a $1 billion campus in north Austin this year that will initially support about 5,000 jobs in engineering, research and development, operations and other jobs. Dynamic music, culture and restaurant scenes help fill the off-hours for the young, tech-oriented professionals making the city their home.
Multifamily outlook: The runway for growth is impressive relative to other markets, and our investments here reflect that. We see strong potential for multifamily development for at least the next few years.
Nashville Remains a Superstar of the South
- MSA population growth 2020-21: 0.86%
- Job growth 2020-21: 5.42%
- Rent growth 2020-21: 20.50%
The upward spiral of population and employment in Tennessee’s capital is fueled by transplants attracted by an affordable, four-season lifestyle (and no individual income tax) and a strong pro-business climate. Entertainment options stumbled but didn’t slow during the pandemic. The Tennessee Titans football team is in talks to build a replacement stadium in Nashville costing up to $1.2 billion; and a privately funded, $335 million soccer stadium opened this spring, courtesy of the Nashville Soccer Club. Global asset management firm Alliance Bernstein cited lower taxes and housing costs and shorter commutes in announcing its HQ move to Nashville from Manhattan in 2018, along with $70 million in new investment in the city and 6,000 jobs. Amazon opened a downtown high-rise last year, with another due next year. Oracle America is investing $1.2 billion to create a regional HQ, paying $254 million for an East Nashville site. General Motors plans a second electric vehicle battery plant – a $2.3 billion investment expected to create 1,300 jobs.
Multifamily outlook: We are committed to Nashville, where we have several investments. While prices are rising, it remains a comparative bargain, and we see the area continuing to be one of the fastest-growing markets at least through 2023.
Our Approach to Market Selection
Origin’s Multifamily Markets to Watch 2022 was compiled using Origin Multilytics®, our proprietary suite of machine-learning models, and from the first-hand expertise and knowledge of our deal officers located throughout the markets in which we invest. For this report, Multilytics studied data from about 150 U.S. markets. We narrowed the list to the cities that are expected to far exceed the 3% in average annual rent growth for each of the five years leading up to the pandemic, as calculated by the Bureau of Labor Statistics.
While we understand that real estate markets are always evolving, we look for places where employment and demographic trends point to future opportunities. In these five cities, we see plenty to be optimistic about.
