Marcus & Millichap

The top two markets for the multifamily sector from last year trade places for 2018, according to Marcus & Millichap’s 2018 Multifamily North American Investment Forecast. Driven by robust employment in the tech sector and soaring home prices that keep rental demand ahead of elevated deliveries, Seattle-Tacoma ranks first on the chart.

The metro area outperforms last year’s leader, Los Angeles, which slid one spot. Sacramento, California’s robust rent growth and low vacancy pushed the market up 12 positions in the ranking (to number 8), the largest increase in the index. Other double-digit movers were Orlando (to number 17) and Detroit (to number 28).

Apartment investments will maintain a positive outlook in 2018, says the report, as the combination of steady job creation, healthy demographics, and an accelerating pace of household formation sustains renter demand. The consistent flow of newly developed units—a top-of-mind consideration for many investors—increased competition for Class A apartment assets in cities with disproportionate deliveries.

The effects of the additions tend to be concentrated, and deliveries will wane in the coming year, supporting sound performance metrics in most markets. Class B and C workforce housing will continue to outperform as vacancies in these properties remain at historical lows, enabling owners to justify strong rent growth.