Midwest Apartment Market Should See Solid Performance in 2019

Rising interest rates, possible slowdown in new construction likely to keep apartment occupancies stable and rents growing.

“Steady Eddie.” “Consistently consistent.” Those are a couple of the phrases that come to mind when I’m asked to describe the Midwest apartment market. Granted, they may not be the most exciting words around, but they capture the appeal of the region’s secondary and tertiary markets to investors.

Cities like Indianapolis and Kansas City will likely never produce the soaring rent growth we sometimes see in coastal metros like San Francisco or New York. But they do experience strong, consistent operating fundamentals that lead to reliable increases in rental rates. Combine these factors with investment sales prices that are often considerably lower than what you’ll find in the gateway cities, and investors see that Midwest markets can generate attractive, dependable returns.

Along those lines, 2018 was another good year for apartment markets in the Midwest. For instance, effective rents in Indianapolis rose by 4.7 percent over the 12-month period ending in September 2018, according to the most recent report from Marcus & Millichap. Similarly, the investment research firm has predicted that effective apartment rents in Kansas City will increase by 4.3 percent over the course of 2018.

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