AS RENTAL MARKETS turn in many areas of the country, some smaller markets actually look ripe for new development. So Apartment Finance Today contacted New York-based research firm Reis and asked it to cull its apartment sector database for metros that have experienced low supply growth relative to the metros' historical long-term averages.

Here is a look at three markets that could be fertile for growth.


Nestled at the base of Pike's Peak Mountain, Colorado Springs holds promise for multifamily developers. The city, which frequently shows up on various lists of the best places to live in the country, enjoys demand fueled by five military bases, including that of The Air Force Academy. The market has also seen a stunning lack of movement on the transactions front: Only seven properties have changed hands this year. Meanwhile, only one new property came online in the past two years. The market's vacancy rate is 6.9 percent and will probably fall considering the thin pipeline. The problem, however, is rents: They're at $0.87 per square foot and need to jump to $1.20 or $1.25 per square foot to make new construction work. Still, after a couple of years with no supply, the demand may well be there to make those numbers work.


Columbus has a lot going for it. To begin with, Ohio State University—with its massive campus—is based there. It's also the state capital and home to companies such as Battelle Memorial Institute, Limited Brands, Nationwide Insurance, and Owens Corning. This economic diversity has helped the city weather the recession relatively well. Now, it's a place some people are looking to build. For instance, Columbus-based Nationwide Realty Investors has started construction on Flats on the Vine, a 232-unit building in the area's arena district. That district, which boasts jobs in the medical, insurance, and creative sectors, also continues to add office space, which bodes well for future development.


The largest city in Kentucky, Louisville is best known for the Kentucky Derby and college sports. But it's been a good place for rental operators, as well. The city is moving up the list of Carrollton, Texasbased M/PF Research's national market rankings. “Apartment occupancy is now back up to around 95 percent, having already recovered the slight loss that was seen a couple of years ago,” says Greg Willett, vice president of research and analysis at M/PF. “And rents are beginning to inch up. The metro seems positioned for a very solid performance over the near term.”