The Latest from MPF Research: A Spotlight on America’s 3rd and 4th Hottest Submarkets
Updates from America’s #1 source of multifamily research data, MPF Research.
Our last segment of The Latest from MPF Research took us to the east and west coasts. As we continue our countdown of America’s hottest submarkets, we move to the South. Read on for a look at the 4th hottest submarket, downtown Houston, and the 3rd, central Nashville.
#4: Downtown/Montrose/River Oaks, Houston
While this submarket ranks highly on the list, its position is a bit deceiving. That’s because Houston rises and sinks with the price of oil, and over the past couple of years oil has taken a hit. The average start date for new projects was October of 2014, and there has been only one new start since the third quarter of 2015. Recent layoffs in the oil sector combined with the increased apartment supply have resulted in a lackluster current occupancy rate of 93.2%.
The construction numbers have been impressive. The submarket’s apartment inventory has increased 88.0% (4,343 new apartments) since 2012, with 6,498 units under construction at the end of 1st quarter 2016, all of which are slated for completion by 4th quarter 2017. With the occupancy rate already mediocre, oil prices remaining low and so many new apartments coming online over the next year, one might question the submarket’s ability to absorb the inventory.
But long term, the area has a lot going for it. Naturally, the biggest draw of the downtown area is proximity to jobs. Houston is America’s fourth largest city, and sprawls in every direction. Dozens of large companies, including Chevron and Shell, are located downtown, and living nearby eliminates an exasperating commute on the city’s frequently crowded highways. This being said, there’s a healthy contingent of people moving downtown for the lifestyle who work in employment clusters elsewhere, with the knowledge that their commute will be in the opposite direction of most others’ and therefore a whole lot quicker.
There are plenty of draws to the downtown Houston area. It’s sharing in the trend seen nationally of professionals moving back to city centers where action and “character” can be found. The Montrose area is a prime example of an eclectic, sometimes eccentric and very interesting in-town neighborhood that’s attractive to those turned off by more generic, suburban-looking parts of town. The Theater District and Museum District supply a steady stream of culture, and restaurants and shops abound. A number of universities are in and around the area, adding a youthful element.
Opened in 2004, the METRORail light rail system is giving downtown residents easy access to most parts of the far-flung city, with new routes currently being added. Major highways border the downtown area for those who prefer to drive.
As mentioned, multifamily project starts have stalled in tandem with oil prices, and it is anyone’s guess when the downtown Houston area will absorb the inventory now coming online and construction will pick up steam again.
View the comprehensive list.
#3: Central Nashville
Two-thirds of the 10,000 new apartments swelling Central Nashville’s inventory since 2012 are currently under construction. In other submarkets this might engender fears of excessive inventory as the 6,000 units still being finished come on line. But downtown Nashville is booming, and there’s optimism that its resurgence will roll forward for some time yet. The city has recently landed on numerous lists of “best cities for job growth” and “strongest economies,” and the population is steadily increasing.
Nashville is held up as one of the nation’s big success stories in downtown rebirth, most notably due to its Riverfront Revitalization Plan. The city has consciously focused on making its downtown a work-live-play space that’s attractive to all: tourists, residents, and suburbanites wanting to “go downtown” for the sorts of activities and experiences they can’t get in their own neighborhoods. It’s no longer a ghost town after dark: it’s a destination.
Downtown Nashville’s population has almost quadrupled since 2000, to 7,840 people in 2014, according to the Nashville Downtown Partnership. Other popular Nashville neighborhoods within the Central Nashville submarket that have seen significant development include West End, Midtown/Vanderbilt, Hillsboro Village/Belmont, The Gulch and 12 South.
The so-called “SoBro” area (south of Broadway) is typical of the hip, up-and-coming in-town neighborhood that has seen lots of new activity not just in Nashville but across the country. It offers interesting architecture, cool bars and restaurants, entertainment venues and the urban feel that is drawing so many back from the suburbs. Most of the city’s sports and entertainment arenas are located in this area as well.
Just south of downtown, “The Gulch” is attracting young adults with a $1 billion redevelopment effort that is luring companies along with trendy retailers and restaurants to locate there.
Of course, Nashville is most famous for its premier position in the music business, and this will continue to attract the tourists it always had, who bring money with them to help support the downtown attractions new residents can take advantage of when they move into the many new multifamily communities popping up in this now vibrant downtown.
View the comprehensive list.
Check the final two submarkets in this series, as reported by MPF Research.