- Chicago tops the list for its large population, diverse economy, and competitive pricing compared to other major cities, offering solid returns.
- San Diego ranks second, with a tight apartment supply, high demand, and strong industries like defense and healthcare.
- Nashville, with its booming population and growing cultural and business sectors, remains an affordable yet lucrative market for investors.
- Other notable cities include Raleigh, Dallas, and Boston, each offering favorable market conditions, such as high demand and long-term growth potential.
Multifamily real estate remains a top investment strategy in cities with strong economic fundamentals, growing populations, and favorable supply-demand dynamics.
While some metros are facing oversupply and rent pressures, GlobeSt reports that others offer promising opportunities for high returns and long-term growth.
According to a report by Crexi and PwC, 10 US cities stand out as ripe for multifamily investment, each bringing unique advantages and growth potential to the table:
1. Chicago, IL
Chicago tops the list for multifamily investment due to its sizable 2.7M population and a diverse economy spanning healthcare, education, and finance. The city’s competitive pricing—$188 PSF and a 7.1% cap rate—compared to major cities like NYC or San Francisco makes it an attractive option.
Additionally, Chicago’s median rent for a one-bedroom apartment is $2,112, significantly lower than other major metros, providing affordable housing options for renters and steady cash flow potential for investors.
2. San Diego, CA
San Diego ranks second due to its limited apartment supply and high rental demand. The city’s economy benefits from industries like defense, healthcare, tourism, and technology, with a growing population of over 1.4M residents.
With a median one-bedroom rent of $2,448, San Diego provides consistent rent growth and long-term appreciation. The city’s geographic and zoning limitations ensure high occupancy rates, making it a solid choice for multifamily investors looking for stability.
3. Columbus, OH
Columbus stands out for its affordability and ongoing infrastructure improvements. The city’s population of over 900K benefits from its proximity to Ohio State University, offering a steady supply of student renters. Additionally, the city’s growing industries, including healthcare, education, and technology, contribute to long-term market stability.
With a median rent of just $1,200, Columbus is one of the most affordable cities for multifamily investment. Investors can expect solid returns, with a 6.0% cap rate and sales comps at $155 PSF.
4. Nashville, TN
Nashville’s dynamic growth is driven by its cultural appeal and expanding business sectors. With more than 2 million residents, Nashville’s affordable median rent of $1,630 makes it a top destination for younger professionals.
The city’s strong job market, supported by industries like healthcare and entertainment, is complemented by urban development projects that improve desirability and property values. Sales comps in Nashville are $338 PSF with an attractive cap rate of 5.2%.
5. Raleigh, NC
Raleigh is quickly becoming one of the top tech hubs in the country. With a strong job market and a low unemployment rate of just 2.6%, Raleigh is home to three major universities, including North Carolina State University, which boosts demand for student housing.
Raleigh’s median rent of $1,200 for a one-bedroom apartment keeps it affordable, while the tech and life sciences industries contribute to long-term growth. With a 5.4% cap rate and an asking price of $304 PSF, Raleigh offers solid returns for multifamily investors.
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6. Boston, MA
Boston remains a top multifamily market, driven by its world-class educational institutions like MIT and Harvard. The city’s median one-bedroom rent is high at $3,731, reflecting the demand in this highly competitive market. Despite the premium pricing, stabilized properties in Boston maintain high occupancy rates.
The city’s recent proposal for $110M in new multifamily construction indicates a continued focus on addressing housing shortages, further fueling the city’s multifamily market. Sales comps stand at $665 PSF, with a 6.0% cap rate.
7. Dallas, TX
Dallas continues to thrive as one of the top locations for multifamily investment due to its booming population and employment growth.
With a median rent of $2,162 for a one-bedroom unit, Dallas remains affordable compared to other major cities like San Francisco and New York. The city’s business-friendly environment has attracted numerous employers, further driving population growth.
Dallas offers a solid 5.4% cap rate and $269 PSF sales comps, making it a strong choice for investors seeking high rental yields.
8. San Jose, CA
San Jose, located in the heart of Silicon Valley, benefits from the region’s rapid growth in technology and artificial intelligence. Although the median rent for a one-bedroom is $2,630, it remains more affordable than nearby San Francisco, where rents exceed $3,500.
The demand for rental properties in San Jose has led to significant rent growth and a low vacancy rate of around 3.5%. Sales comps in San Jose are $526 PSF, with a 5.0% cap rate.
9. Philadelphia, PA
Philadelphia’s growing economy, especially in education, healthcare, and technology, makes it a prime multifamily investment market. With a median rent of $1,928, the city offers competitive rental yields and steady demand.
Low vacancy rates and infrastructure improvements support long-term stability, while the city’s expanding economy helps maintain strong demand for rental properties. Sales comps in Philadelphia are $213 SPF, with an attractive 7.4% cap rate.
10. Minneapolis/St. Paul, MN
The Twin Cities are expected to see steady growth over the next decade, supported by industries like healthcare, finance, and technology. With a median rent of $1,762 for a one-bedroom apartment, Minneapolis/St. Paul offers a balance of affordable rent and stable rent yields.
The area’s moderate vacancy rates and strong job market make it an attractive market for multifamily investors. Sales comps stand at $112 PSF, with a cap rate of 6.5%.roviding significant liquidity to the sector.
CMBS, CDOs, ABS
Commercial mortgage-backed securities (CMBS), collateralized debt obligations (CDOs), and asset-backed securities (ABS) saw a combined increase of $9.6B (or 1.6%) in Q3.
These securities, which pool together mortgages for sale to investors, remain an attractive option for those seeking higher returns, contributing to the ongoing strength of the CRE debt market.
Pension Plan Pivots
While many sectors saw growth, one notable trend was the reduction in exposure by pension plans, which reduced their holdings in commercial and multifamily debt by 8.8%.
The pension funds’ decision to pull back suggests they’re rethinking their long-term investment strategies amid evolving market conditions. It signals a changing risk appetite among institutional investors, possibly due to still-high interest rates and uncertainty.
Zooming Out
The continued demand for multifamily debt indicates the commercial mortgage market remains resilient. The Q3 results highlight the ongoing confidence from major investors, such as life insurance companies and government agencies, in the multifamily sector.
Looking ahead, the market could experience further growth as inflation stabilizes and borrowing costs decrease. With interest rates potentially easing, originations may see a boost, providing additional momentum to the commercial and multifamily mortgage markets in 2025.
