Right now, the multifamily market is strong nationwide, but according to Ten-X Commercial, there will be a downturn in the next three years. Ten-X says there are some markets built to last while others just don't have what it takes .

In its new report, the commercial real estate company lists the top five “buy” and “sell” markets as the sun sets on this long upcycle. 

The top five “buy” markets are Houston, Raleigh-Durham, Salt Lake City, Fort Worth and Charlotte. Ten-X says these markets are flush with demand driven by strong local economies. Here are the highlights for each of these hot markets:

  • Houston: An upturn in the energy sector is fueling the local economic growth and bolstering rents. Rents are up 6.1% year-over-year and its vacancy rate is down 50 basis points YoY. Things are looking good for H-Town.
  • Raleigh-Durham: Unemployment fell 50 basis points YoY and is below the national average; job growth is at about 2% and payrolls are at an all-time peak. Rents are up 5.3% YoY and projected to continue to rise even during the eventual national economic downturn.
  • Salt Lake City: Rapid job growth is driving solid absorption and vacancies remain tight in Salt Lake City. Ten-X predicts rents will rise 12.6% by 2021 and net operating income will climb by 3.4% annually during that same time period.
  • Fort Worth: Low unemployment, solid job growth and a strong trade and transportation sector are carrying Fort Worth high. Rents are projected to grow 12.3% by 2021 while NOI increases 3.2% annually through 2021.
  • Charlotte: Population growth near triple the national average and job growth around 2% have kept things sunny for the Charlotte multifamily market. Rents are up 6.4% YoY and projected to grow 10.2% more by 2021.

On the other side of the coin, Miami, San Jose, New York City, San Francisco and Oakland are the top five “sell” markets. Thanks to new supply, these markets have been exhibiting rising vacancies and flattening rates for last six months, and Ten-X says it might be time for investors to move on from them.

  • Miami: A favorite of developers in recent years, Miami’s economy is now cooling and the large number of multifamily deliveries in the pipeline are projected to drive rent growth down to about 0.5% by 2021, while vacancies spike to 10%, according to Ten-X.
  • San Jose: New deliveries and a slowing population growth are San Jose’s thorns. Though it has good fundamentals like a 2.1% rise in rents YoY, its demographic factors and pipeline are expected to take vacancies up to 6.7% and drop rents by 2.7% between now and 2021.
  • New York City: As supply pours into the city constantly and its economy weakens, vacancies are shooting up. Rents are supposed to fall 1.2% from their current position and vacancies are projected to get up to 5.9%.
  • San Francisco: Much like San Jose, San Francisco has a large pipeline without the demographics to support it. Vacancies are projected to rise to 6% while rents fall 4% by 2021.
  • Oakland: Oakland’s bread-and-butter, its tech sector, is slowing down, growing at 1.5%, well below its 2015, 2016 pace. Unemployment is extremely low, but fewer people are moving to Oakland to absorb its incoming deliveries. Vacancies are looking like they will spike to 5.4%, and rents are expected to fall 2.8% by 2021.

Do you agree? Let us know what you think in the comments below.