Downtown Apartment Construction Gets Hot in the South

Downtowns have turned into hot destinations for multifamily construction and may even have outpaced what demographics might have suggested.

An analysis of Yardi Matrix data by StorageCafe, which is a storage space marketplace that Yardi runs, suggests that southern states have taken a lead as “the country’s major cities experienced a resurgence of apartment construction in their central neighborhoods over the last decade.”

StorageCafe/Yardi looked at the hundred largest cities and ranked them by number of multifamily units delivered over the last ten years. The company found that “about 391K downtown apartments were built from 2013 to present day, representing 37% of the total inventory of multifamily units in those areas.”

Even before delving deeper, that alone is an interesting number. Approximately 65% of households in the U.S. own where they live, according to Census Bureau data as provided by the Federal Reserve Bank of St. Louis. And about 80.7% of the U.S. population lives in urban areas, as data from the Census Bureau reports. Multiple the two and it would seem that 28.2% of renters would live in urban areas.

However, the number of apartment dwellers in urban areas isn’t the multiplication of the two because there will be a much larger segment of renters. What the Yardi figure shows is that 37% of the total stock of downtown apartments, which would hold a disproportionately large percentage of the population, has been built within the last ten years.

As might be expected, out of the top 20 most active building markets, the majority (14) were either in the Sunbelt or West, with Jersey City, Brooklyn, Minneapolis, Baltimore, Chicago, and Philadelphia also appearing.

Top market was Atlanta, which has seen 21,508 units built from 2013 to 2022. Closing out the top five were Los Angeles (19,342), Houston (15,607), Charlotte (12,836), and Miami (12,401). The numbers drop off quickly, though. The last five in the top 20 are Philadelphia (8,019), Tampa (7,494), San Jose (7,487), Richmond (7,329), and Orlando (7,264).

But moving away from the gross numbers, the volume per year is less impressive, especially when considering changes in population. The Census Bureau shows Atlanta’s 2010 population at about 420,003 and the most recent estimate at 496,461. That’s 76,458, or, at 2 people per unit, 38,229 units’ worth rather than the 21,508 built. On the other end of the list, Orlando had 238,300 people in 2010 and 309,154 in 2021 for an increase of 70,854. Still using two people per apartment, that would be 70,854 versus 7,264. And this is the top 20 for building units.

These numbers suggest that many cities are far behind adding the numbers of apartment units they need and that assumes none of the older buildings became obsolete or were torn down.