The Latest from MPF Research: Exploring America’s 5th and 6th Hottest Submarkets
Updates from America’s #1 source of multifamily research data, MPF Research.
For this edition of The Latest from MPF Research, we’re going coast to coast. We continue our countdown of the nation’s 10 most active submarkets for apartment construction with two on opposite sides of the country.
#6: North San Jose/Milpitas
Coming in at #6 is the northern section of San Jose, flowing further northward into the Milpitas area. Traditionally a bedroom community for Silicon Valley, this submarket has experienced continuing pressure for multifamily housing as tech companies continue to generate jobs (and commuters).
Inventory since 2012 is up 80.7% (5,397 units), including units under construction at the end of the first quarter of 2016 (2,367).
The big question about this submarket is the extent to which growth will continue considering recent policy obstacles designed to let commercial and industrial growth catch up to residential growth. Commercial development brings in more tax money than residential while demanding fewer city-provided amenities (parks, schools, police and fire services, etc.). But developers have been doing just fine providing housing for relatively high-earning workers willing to commute to their Silicon Valley jobs. Now, restrictions are in place to calibrate residential construction to the rate of commercial construction, in order to create a more balanced live-work-play community.
And there’s another restriction: rent increases are limited to 8% annually without documentation of significant improvements to the property, and older apartments (pre-1979) are subject to stricter rent control.
For these reasons, residential construction has been creeping northward to the Milpitas area, with fewer restrictions but still close enough to house workers for Silicon Valley employers.
Despite the controls, there’s little reason to think that the submarket will become sluggish anytime soon, assuming that tech industries remain strong and that efforts to spur commercial development in the North San Jose area itself are successful, creating a more desirable residential/commercial balance that will allow local officials to ease up on restrictions.
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#5: Navy Yard/Capitol South D.C.
Clear on the other U.S. coast, Navy Yard/Capitol is not only one of the hottest submarkets in America, but also one most likely to continue rolling forward at a strong pace. In fact, more than half of the almost 6,000 units added since 2012 are currently under construction, demonstrating a lot of momentum that’s expected to continue into the future.
Why the excitement? This is an area of the city that’s ripe for development and has plenty of potential left to exploit. It’s directly south of the U.S. Capitol building and National Mall, but it has only recently seen major development activity. It borders on nearly six miles of waterfront, some of it not claimed by the government and beckoning renters who want water views and access. The Wharf community, for example, in the Southwest Waterfront neighborhood, boasts a mile of waterfront along the Washington Channel.
A number of convenient modes of transportation are available to carry residents throughout the metro and beyond, and two major interstates run through the submarket, connecting the area to the rest of D.C., northern Virginia and Maryland.
The submarket also boasts plentiful parks and benefits from a recent surge in entertainment, retail and dining establishments. Benefiting from the government’s longstanding presence in the area and the many job opportunities that it provides, Navy Yard/Capitol South is developing into a balanced live-work-play environment.
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