Where they are and why isn’t a matter of guesswork on developers’ parts, but careful analysis based on a host of drivers before shovels go into the ground.
Many people pride themselves on making discoveries, whether a fabulous restaurant, new playwright, fashion designer, vacation retreat or a favorite athlete.
Pinpointing the next hot real estate markets is no different. Developers hope to uncover them while land is still available and affordable. But what predictors do they use to ensure that if they build (or convert), renters will come? Is it full occupancy in existing apartment inventory to indicate need for more housing, especially if for-sale home prices are high? Is it a population increase that signals more units are warranted? The list of what makes a market take off includes additional factors:
- A favorable business climate that offers incentives to relocate, low or no state income taxes and easy barrier-to-entry to foster development
- A diversity of businesses relocating so the local economy doesn’t rely on one industry when down cycles occur
- Good transportation to and within an area to make navigation easy
- Availability of key facilities such as universities, hospitals, retail and other services
- Good water and sewer infrastructure for building, says Lesley Deutch, Managing Principal with John Burns Research and Consulting
- A good climate and recreational facilities to make life pleasurable for a healthy work-life balance
- A safe environment as some businesses relocate to avoid crime, what Citadel CEO Ken Griffin talked about when he moved his company to Florida from Chicago
- Adequate electrical grids or the ability to install them as energy becomes a bigger concern, says Ed Del Beccaro, Executive Vice President, San Francisco Bay Area Manager for TRI Commercial Real Estate.
Other data helps developers more such as a look at historical absorption patterns that may reveal future patterns, says Peter DiCorpo, co-founder and COO of multifamily developer Brook Farm Group. Even a check of U-Haul’s list of top growth cities based on where vans are headed can be an indicator, says Josh Kassing, Senior Vice President, Mary Cook Associates.
Few locations reflect all the key factors but enough may come together to make a city or suburb so desirable that it attracts interest and at every tier of the apartment market, says Al Lord, founder and CEO of Lexerd Capital Management, a real estate firm that sponsors investments in multifamily assets.
Conversations with these sources and others who develop multifamily communities cited a handful of areas they expect will mirror the excitement witnessed as Austin, Texas, Nashville, Tenn., and Miami gained buzz in recent years. Despite the similar drivers they share, most also have something novel about them that developers try to showcase in their building plans. “It’s akin to putting together the pieces of a jigsaw puzzle,” says Mary Cook, President of her eponymous firm.
South Bronx, N.Y.
While Brooklyn and Queens took off—with rents similar to those in Manhattan—the Bronx seemed overlooked. It’s now experiencing development in its South Bronx neighborhood, says Peter Bafitis, AIA, Managing Principal, RKTB Architects. There, land remains more affordable, but besides developing buildings from the ground up, developers recognize the viability of existing stock that can be converted or purchased and torn down to start over, he says. Developers also consider the area’s well-connected subway and rail lines to Manhattan a big plus. “This is what we saw happen in Brooklyn 25 years ago,” Bafitis says. His firm is working on a few projects in the area: 10 Van Cortland is a subsidized development in progress; Phoenix Estates II blends affordable units for seniors and families with green space and community uses on the street level, and 683 Thwaites Place is also affordable housing in a not-for-profit development that was sustainably designed to take advantage of the adjacent subway line. CetraRuddy, an architecture and interior design firm, recently completed its first multifamily project in the Bronx in the area, says Nancy Ruddy, co-founding Principal and Executive Director of Interior Design, who lauds the location, especially for those in hybrid work situations.
“You can be in Midtown in 20 minutes,” she says. She credits Mayor Eric Adams for making development easier by changing zoning laws through a reform proposal known as the City of Yes for Housing Opportunity and by speeding up the approval process. The firm’s work there helped her and colleagues deepen their understanding of the area’s rich multicultural heritage with restaurants and coffee bars, plus its proximity to the Harlem River, Bronx Zoo and New York Bronx Botanical Garden. In collaboration with developer RXR, it designed Maven, a 27-story building with 200 units in the Mott Haven neighborhood. Ruddy attributes the quick lease-up to the units’ affordable market-rate rents, large footprints and novel exterior design of cubes that seem to dance, a reflection of the area being the birthplace of hip hop. The building also invites in neighborhood residents with a gallery for local artists’ work, outdoor places, room for a future café and retail and a brick façade that repeats the material of surrounding buildings.
Tampa, Fla.
Located on Florida’s west coast, Tampa has become one of the country’s fastest growing cities because of its strong job market, a mild climate and casual lifestyle with numerous recreational options, absence of a state income tax, lower cost of living and business-friendly policies to encourage development. The city also has an expanding port that is strategically the closest U.S. deepwater seaport to the Panama Canal. It was also ranked the top emerging tech market in the country by Forbes and has a booming healthcare scene and diverse white- collar employment, says Andrew Visnick, Managing Director of Newmark’s Tampa office. It has gained more office buildings and office parks for a variety of businesses, seen its universities expand and is now watching the Speros Project move forward on 775 acres in North Tampa, which when completed in 2028 will have 14,000 employees working at the site’s Moffitt Cancer Center, says Visnick. Also adding buzz is the new Water Street Tampa project, a $3 billion, 56-acre mixed-use development that’s transforming the area into a new neighborhood of apartments, condos, hotels, restaurants and retail, according to its website. Other drivers putting Tampa higher on the radar, Visnick says, are a centrally located, top-rated airport and access to major roadways and highways, an expanding bridge network and infrastructure for a light rail. Despite annual concerns about hurricanes and high insurance costs, rates have come down 25% in the past year due to insurance carriers reentering the market, Visnick says.
West Palm Beach, Fla.
Long viewed as the sleepy, more affordable relative of livelier, fancier Palm Beach, West Palm Beach is seeing growth as developers move in to build and convert commercial and office buildings for such companies as Goldman Sachs and Elliot Management, along with apartment communities to house young professionals and other essential workforce members such as teachers and police officers, says John Zalkin, Partner-EVP Client Relations at RKW Residential. Already in the pipeline and to be completed in early 2025 is the city’s Nora District, which will transform through adaptive reuse of several industrial railroad buildings near train tracks in a once overlooked downtown area. The project will be finished in two phases: Phase 1 will include commercial space on the ground level, housing, retail, food and beverage services and landscaped open spaces with offices on the second floor. There are plans for a hotel by BD Hotels, set to open in 2026. Phase 2 will include a residential component. Francis X. Scire Jr., Head of Leasing with the Nora District, credits the pandemic for breathing new life into the area as many migrated from the North.
“People realized the area is a good place to live and benefit from no income tax. With this project, a joint venture of Place Projects, NDT Development and Wheelock Street Capital, the area is no longer a secret,” Scire says. New York City’s Related Cos. is constructing additional towers with offices and retail as part of its CityPlace, which has gone through several name changes. Also downtown, The Estates Companies is building a 321-unit luxury rental property Soleste Palm Station. All the development will benefit from West Palm Beach station’s Brightline stop, which makes commuting throughout the East Coast easier and will connect to the West Coast. How much development opportunity is left remains a question. “There’s some room a bit North and South but a lot of the area is now well spoken for,” Scire says.
Savannah, Ga.
With Charleston, S.C., already one of the South’s most talked-about destinations, Savannah—just 100 miles down I-95—is stepping into the limelight as a slightly smaller but attractive place to live and work, says DiCorpo. Lord sees this coastal city booming in part due to employment and population growth because of its more active port. In addition, Hyundai has invested $7.6 billion on a 2.9-acre site designed to produce up to 300,000 vehicles per year, manufacture EV batteries, train workers and offer 8,500 jobs, Lord says. Since it was founded in 1979, the Savannah College of Art and Design (SCAD) has grown into the world’s largest university for creative professions and generated $1.3 billion for Georgia last year; SCAD Atlanta is in Midtown and held its first classes in 2005.
Raleigh-Durham and Charlotte, N.C.
The Sun Belt markets continue to be the country’s fastest-growing areas because of long-term migration patterns, job growth and population growth, says Claire Hansen, Director of Development, RangeWater Real Estate. “Sun Belt markets offer a lower cost of living and great job opportunities compared to other regions around the country. However, right now, there are many Sun Belt pockets with temporary supply issues through 2024-25. Most Sun Belt developers are expecting absorption to bounce back in 2026-27,” she says.
For AvalonBay Communities, Raleigh-Durham and Charlotte—along with Denver, Austin, Dallas and southeast Florida—represent AvalonBay’s expansion markets, which have been targeted over the last several years, in addition to the company’s existing established markets in eight other states along the East and West Coasts. Three years ago, AvalonBay officially entered North Carolina. As with all expansion markets, this was because the company’s in-house market research team pinpointed these cities as places where industries were moving and where there was an attractive, high-quality lifestyle. “In our North Carolina cities, you can be outside most of the calendar year; have well-connected highways and two international airports; access a wide variety of restaurant, retail and recreation options; and can take advantage of the intellectual capital available through several universities as well as the businesses that come out of them,” says Liz Smith, Senior Vice President of Development for North Carolina. And though there may be red tape to get a community off the ground in these markets, Smith says her firm has found that AvalonBay’s development DNA is a competitive advantage because of how the company handles the entire development lifecycle and because the team lives in its markets, which helps them get to know local processes well. “We pride ourselves on working through any challenges,” she says. In these new markets, and others, it also relies on a trio of strategies to grow, stay flexible and move quickly: Build from the ground up, acquire existing stabilized communities or fund local developers to build projects, all while AvalonBay maintains ownership and operations of the community. The company also looks at a web of locations that meet its criteria, which may extend from downtown out to the suburbs. CetraRuddy has also identified the area as a strong market for development and specifically Chapel Hill since it offers a “gentler approach to living with great medical services, amazing museums, music and cuisine,” Ruddy says. And it’s home to the University of North Carolina at Chapel Hill.
San Diego.
The higher costs of building and living in Southern California have caused many developers to steer clear of the region, yet certain areas are attracting attention, says Bob Lisauskas, Principal, RDC, an architecture and planning firm. He sees this happening in the San Diego area because of its population growth, strong job market and a significant housing shortage. “After COVID, development slowed in the central downtown core [and] storefronts became vacant...,” he says. But areas on the perimeter and near a trolley line and road network appeal such as Mission Valley, National City in the South Bay area and Scripps Ranch. The area also has good healthcare, several universities and recreational options. To take advantage of the good climate and outdoor life, his firm includes a balcony in each unit, “almost unheard of in other regions,” he says. Also, because malls are shrinking, many of the anchors are relocating to new mixed-use developments, which represent a concept in high demand for the area, which San Diego’s government is encouraging, he says. Landscape architect David McCullough, PLA, ASLA, Principal at McCullough Landscape Architecture, cites other satellite markets in the area that are becoming hotter for development such as North Park, South Park and Barrio Logan due to their proximity to the metropolitan area, lack of tourist traffic, diversity of residents’ ethnicity and high walkability for properties built along transit corridors. Also in Southern California, the Inland Empire is emerging as a hot market, driven by significant investment and population growth as people leave more expensive and denser locations such as Orange County, Los Angeles and the Bay Area.
Other areas on the radar:
Smaller, Tertiary Southeastern markets.
As the bigger cities have grown and gained attention, there’s been spillover to smaller markets such as Huntsville and Birmingham in Alabama. Many prefer living in suburban towns with urban “lite” amenities, Deutch says. Jeff Fenner, Director of Multifamily at Denholtz Properties, gives as examples two smaller markets within commuting distance of Charlotte since, he says, “not everyone wants to live in the downtown of a major city.” With Eli Lilly and Company’s decision to build a $2 billion pharmaceutical manufacturing campus in Concord, about 25 miles outside of Charlotte, Denholtz, along with its joint venture partner, Lansing Melbourne Group, decided to build three buildings with a total of 300 units. The town itself is undergoing a major reinvestment of its downtown area and offering developers incentives to relocate. Denholtz knew the area from its work on two buildings in Kannapolis, about six miles away, one of which has the draw of a Minor League Baseball stadium that can be viewed from its property. Another tertiary market that’s becoming better known, according to Deutch, is Lebanon, Tenn., 30 miles east of Nashville. She and Jason Fort, Executive Vice President of Business Development at Asset Living, also put several college-centric cities like Gainesville, Fla., Athens, Ga., and Oxford, Miss., in the spotlight for their surging enrollments and growing returning alumni base that necessitate more housing product. Because of all the options college towns offer, they’ve become good places to live for young professionals who’ve graduated and older adults who may be looking to rent by choice.
Mid-Atlantic.
The area is attracting more attention due to the economic growth of the federal government, which has led to population growth, says Del Beccaro. Boston- based Cruz Companies, which focuses on affordable development, is looking at Maryland’s College Park neighborhood where the University of Maryland is expanding, where there’s a good transportation hub and where its Prince George’s County boasts one of the country’s highest per capita incomes for Black residents.
Boston and smaller cities.
Even though they’re deemed expensive places to build and live, both Boston and Cambridge, across the Charles River, are viewed as hotter markets now because of the increase in research and life sciences facilities located next to major universities such as Harvard and MIT, which also bring in an educated workforce, says Del Beccaro. Cruz Companies views New Bedford, part of Boston’s South Coast region, as a good development market because its cost of land, building and wages are less than in Boston, says Justin Cruz, COO. New Bedford also offers a water location, panache of being a historic city, less red tape to follow than in Boston and a new $1 billion South Coast Rail project that will restore commuter rail service from Boston to New Bedford, Fall River and Taunton. Besides new construction, Cruz is also converting some historic structures into apartment buildings, which offers tax credits.
More New York possibilities.
Although Staten Island, another New York borough, has seen few new multifamily projects get off the ground, it is beginning to see some Request for Proposals for development along its waterfront, says Bafitis. The prime reasons it has not appealed widely are its lack of accessibility with just a ferry and one subway line that is not direct and a lack of interest among some single-family homeowners in it becoming more densified, he says. Ruddy, who says her firm is keeping an eye out for potential development, thinks an above-ground tram would make the area easier to get to. Westchester County, north of the city, offers less costly sites than in Manhattan, and due to hybrid work situations and outdoor space, it’s become a more popular destination in the last five years for young professionals, says Ruddy. But it’s also now becoming more popular for Boomers interested in renting rather than owning, she says. And New York City may see more growth as zoning laws are eased to convert vacant office buildings to mixed-use housing, Bafitis says. “We’re short of housing units throughout the area so any projects may be considered,” he says.
Chicago.
Although some are leaving the Windy City for its long winters and talk of increased crime, others say its time has returned. “Most cities that attract attention won’t have all six or eight appealing factors but will have enough of them to make development worthwhile,” says Alan Barker, AIA, LEED AP, architect with Lamar Johnson Collaborative. He sees its positives as an affordable cost of living: “Not low but not as high as other big cities such as New York and San Francisco,” a good infrastructure, numerous cultural offerings, strong universities and neighborhoods and an increasing number of technology businesses. PsiQuantum recently announced a partnership with the state of Illinois, Cook County, the city of Chicago, Related Midwest and CRG to build the first U.S.-based utility-scale, fault-tolerant quantum computing campus at the former U.S. Steel South Works property. Barker’s firm, Lamar Johnson Collaborative, serves as lead architect on the project. The city is also streamlining its once laborious development process. Of late, development has shifted mostly to the nearby suburbs and exurbs, Barker says. “I’d describe the area’s growth as slow and steady, with more to happen,” he says, echoing the increasingly popular phrase. “Stay alive through 2025.” When lending and construction may pick back up again.
Barbara Ballinger is a contributor to units and is the co-author of 20 books; her latest is Kitchen Conversation: Sharing Secrets to Kitchen Design Success (Images Publishing).