With the start of the new year comes renewed focus for members of Berkadia’s team in the Midwest. Despite a very unconventional 2020, the qualities that have traditionally made the Midwest such an attractive destination for multifamily development—steady job growth, exceptional cost of living, and business-friendly government—continue to inspire confidence going into 2021.
Our team is stronger than ever and prepared to help our clients take advantage of whatever market landscape stands before them; the same way we were ready to guide our clients through the onset of the tumultuous of the COVID-19 pandemic.
Here are a few examples of the unique opportunities already underway in key Midwest multifamily markets as we turn the corner into the new year.
Indy stood out during the pandemic as one of the few metros nationwide where apartment construction remained elevated, while other parts of the economy were slowed down by stay-at-home orders. The metro capped off a five-year construction surge in 2020 with over 12,000 units.
These additions are part of the metro’s targeted urban renewal and economic development, which is driving widespread apartment demand. Occupancy is forecast to remain elevated across all apartment types as another 1,600 units come online in 2021. Overall occupancy is projected to remain above 95.0% this year.
And though questions about the downtown office market may remain unanswered in January, a strong job market and a healthy influx of new residents should ensure no shortage of renters. Over 12,000 new residents are estimated to be moving to the area each year.
The Memphis multifamily market is expected to make a healthy rebound in 2021 amid employment growth and rising homeownership costs. This will be needed as apartment deliveries are forecast double this year following a muted 12 months of new development during the pandemic.
The median home price skyrocketed in the metro, up 13.5% in 2020, and that factor alone will play a role in stabilizing demand for apartment housing for the time being. Leasing activity in 2021 is expected to be as high as it has been in the last five years.
Another positive development for those watching the market is the April completion of St. Jude Children’s new 655,000-square-foot research center in Downtown Memphis. The expansion is expected to double the hospital’s economic impact.
Metrowide, employers are forecast to add nearly 13,000 jobs to local payrolls by the end of December. Apartment operators are expected to respond to these improving economic and apartment occupancy by increasing effective rent 4.0%.
Put into perspective, 2020 was a surprisingly steady year for new apartment construction in Chicago. Though development slowed compared to 2019, the approximately 8,200 units that came online last year was just 200 units shy of the five-year average.
The rate of new construction will continue to cool in 2021 as developers aim to deliver close to 6,300 units. This approach will allow pent-up demand from 2020 to drive stronger absorption over the next 12 months. Renters are forecast to lease-up almost twice as many units this year as they did in 2020.
Significant investment into expanding public transportation options metrowide is another important sign of the metro’s long-term potential as a reliable multifamily market. A multi-billion expansion to the Chicago Transit Authority (CTA) is underway and will dramatically expand job opportunities to residents in both North Side and South Side communities.
Our team is poised for major growth in 2021. We pride ourselves on having an unmatched, client-first mindset and we look forward to putting our vast experience at your fingertips.