As the rental markets turns in many areas of the country, some small markets actually look ripe for new development. In search for that, we contacted New York-based Reis. The firm culled 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 those three markets it says 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 military-fueled demand from five bases, including The Air Force Academy. “This town is heavily influenced by the military,” says Ken Greene, a senior vice president with Apartment Realty Advisors in Colorado Springs.

The market has also seen a stunning lack of movement on the transactions front. Only seven properties have changed hands this year, and only one new property came online in the past two years, according to Greene. The market's vacancy rate is at 6.9 percent and will probably move down with a thin pipeline. The problem, however, is rents. Greene says they’re at $0.87 per square foot, but 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—a massive university—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 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 after the firm successfully opened Arena Crossing in 2002.

Nationwide Realty felt strong enough about the market that even the recession didn’t hamper its spirits. The vibrant arena district, which boasts jobs in the medical, insurance, and creative sectors, continues to add office space, says Melanie Mayo, manager of real estate equity for the company. “We have a long-range master plan for the arena district that includes office, entertainment, and housing,” she adds. “We made the decision during the downturn to go with this project based on success of Arena Crossing, which felt no blip.”


Louisville, the largest city in Kentucky, is probably 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, Texas-based M/PF Research's national market rankings.

“The city made it through the recession with minimal difficulties, partly because there’s been a big move over the past decade to refocus the economy on health care and tourism. 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, after only going flat—no losses—when occupancy hit its brief bump in the road. The metro seems positioned for a very solid performance over the near term.”