How strong is the multifamily sector across the Midwest? According to Marcus & Millichap’s third-quarter research, several Midwest cities continue to see record-setting apartment development and vacancy rates.
Consider the company’s Kansas City report. According to Marcus, 4,675 apartment units will be completed in the Missouri city this year. That’s up from 3,350 new apartment units delivered here in 2016. Vacancy rates here will rise a bit – jumping 100 basis points – to 6 percent this year. But that won’t hurt rents, with Marcus & Millichap predicting that asking rents in the Kansas City area rising 2.8 percent to an average of $890 a month.
The news was good throughout the state of Ohio, too, with vacancy rates remaining law in the state’s three biggest cities. Marcus & Millichap reported that the apartment vacancy rate fell 60 basis points in the third quarter in Cincinnati to 3.1 percent. Asking rents here rose 7.1 percent to an average of $948.
In Cleveland, Marcus predicts that the apartment vacancy rate will end 2017 at a low 3.4 percent, while that figure should be 3.8 percent for Columbus. Both cities will see their apartment rents rise throughout the year, too, with Cleveland ending 2017 with an average apartment rent of $894 a month and Columbus at $910 a month.
Apartment deliveries are expected to soar in Minneapolis/St. Paul, according to Marcus & Millichap, with developers reaching a cyclical high by bringing 6,200 new units into the marketplace by the end of the year. Not surprisingly, all these new apartments will cause vacancies to rise in 2017. Marcus & Millichap predicts that the apartment vacancy rate will rise, but only to a still low 2.5 percent. If this holds true, the apartment vacancy rate in the Twin Cities market will remain below 4 percent for the seventh consecutive year.
Like other big Midwest markets, rents are expected to rise here. Marcus predicts that rents will actually soar this year in the Twin Cities, jumping an impressive 6.5 percent to an average of $1,220 a month.
Deliveries are expected to fall in at least one Midwest city, Indianapolis, with developers bringing about 2,900 apartment units during the year. That is below the 3,900 apartments brought to market in Indianapolis during the peak year of 2015.
Thanks in part to this drop in deliveries, vacancy rates in the Indianapolis area will drop 3.5 percent during 2017 to 5.3 percent. Rents will head in the opposite direction, with Marcus predicting that they will jump 6.7 percent this year to an average of $860 a month.
In Milwaukee, apartment deliveries will hit a new record this year, according to Marcus & Millichap. Developers are expected to add 3,800 new units this year, a new high, and far better than 2016’s delivery of 1,800 rentals. This record-setting amount of deliveries will cause vacancy rates to rise 80 basis points here. Still, the Milwaukee market should end the year with an apartment vacancy rate of just 4 percent.