What are the Top Markets for Small Asset Multifamily Rent Growth?

While large assets (50+ units) have seen greater rent growth in recent years, the small asset market is poised to catch up due to limited supply of Class B and Class C multifamily product.

Though large coastal metros have the highest rent levels, some smaller secondary markets have been experiencing steeper rent increases. Here is a look at the Top 20 metro areas in the United States.

The Most Expensive Metros for Renters

  • As shown above, the average monthly rent for small properties across the top 20 metro areas was just above $1,100 in 2014, according to Chandan Economics’ analysis of American Community Survey Data.
  • Consistent with trends for properties held by institutional investors, large coastal metros dominate the list of the most expensive small asset rental markets in the United States.
  • The gateway markets of San Francisco, New York and Washington DC are the three most expensive metros with rents at small properties ranging between $1,300 and $1,500.
  • San Diego, Boston, and Los Angeles follow the gateways with average monthly rents in the range of $1,150 to $1,300.
  • Coastal metros also headed the list of the most expensive markets for renters at large properties. Consistent with the national data, large properties in these markets commanded higher rents than small properties.

The Markets With the Highest Rent Growth

  • While the top of the list of most expensive markets holds few surprises, the ranking of markets by rent growth rates is more diverse. As shown above, rents at smaller properties increased at an average annual rate of 2.6 percent between 2010 and 2014. Not limited to the coasts, the top five markets include Denver and Portland.
  • Denver (4.9 percent), Seattle (4.1 percent) and San Francisco (4.0 percent) showed the fastest growth in small asset rents, followed by Boston (3.9 percent), Portland (3.5 percent) and the New York metro area (3.0 percent).
  • In San Francisco in particular, the data shows that rent growth has been stronger for units in small properties than large ones. As with New York, the findings may reflect the impact of controls on rent increases for rent-stabilized or rent-controlled apartments.

So what does this all mean at a time in the cycle when rent growth is slowing down? Perhaps those markets that have seen higher rent growth in large assets will now see that growth transfer to smaller properties as the growing pool of American rents seek out more affordable housing costs.