MPF Research, the market intelligence division of RealPage, has highlighted the ten US construction submarkets that have seen the highest growth in new apartment supply since 2012 in their “Nation’s 10 Busiest Submarkets For Apartment Construction” blog post series, which began two months ago and concluded on August 26th with a look at the next ten submarkets.
MPF defines a submarket as “[a grouping] of zip codes for contiguous areas that share certain characteristics such as geopolitical boundaries, apartment composition and socioeconomics” in its press release. It determined its rankings based on the number of apartment completions in each submarket between the first quarter of 2012 and the first quarter of 2016, plus ongoing construction at the end of Q1 2016. The blog series was authored primarily by MPF market analyst Chelsea LeHew, with one post co-authored by MPF market analyst Natalie Long.
The nation’s 100 largest metropolitan areas have expanded by about 820,000 new apartment units altogether since 2012, MPF Research said in a Tuesday press release. 491,945 more units are under construction as of the end of Q1 2016. Overall, the apartment market has seen a growth rate of 8.6% over this four-year timeframe. Region-by-region, the South has had the greatest overall inventory increase, at 12.2%.
At the submarket level, however, the areas highlighted in MPF’s list have seen enormous growth – inventory in every one of the top ten submarkets has grown by more than 60% since the beginning of 2012.
The top submarket on MPF’s list is Uptown/South End Charlotte, North Carolina, which has seen a 107.7% increase in new apartment construction since 2012 – 8.8 percentage points higher than Frisco/Proper, Texas, the #2 submarket. The area was considered a “9 to 5” market in the early 1980s: “Workers drove into the downtown area, worked their 9-to-5 shifts and went back to their homes in other parts of the metro,” according to LeHew. A push on the part of the city to create a more vibrant and livable downtown area in the late ‘80s resulted in the creation of the Uptown Charlotte brand, which has attracted retail, entertainment, and new apartment construction over the intervening years.
In the final post – “Regardless of Location, Nation’s 10 Busiest Submarkets for Construction Share a Sense of Place” – LeHew points out the characteristics that unite the top ten areas. They include attractive retail, entertainment centers, and strong employment. She also notes that areas with public transportation and high walkability have seen an increase in development. Many submarkets were within driving distance of universities, but there was no corresponding increase in student housing. In fact, most of the new supply is market-rate, with little to no new student, senior, or affordable inventory.
“The near-term outlook for these top 10 submarkets varied somewhat, but most are expected to suffer some supply shock over the next year as record numbers of new units are delivered in and around their borders,” LeHew says. “However, the majority of the submarkets are predicted to thrive long term, supported by strong demand drivers.”