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February 3, 2016

As investor appetite for multifamily product has driven the market to two consecutive record-setting years, active investors seeking higher returns are faced with a key question: where next? After two consecutive record-setting years of U.S. multifamily investment, investor appetite for product remains strong with sentiment cautiously bullish heading into 2016. This underlying optimism is largely being driven by constrained housing starts, pervasive leasing performance and, most importantly, structural demand shifts in the U.S. demography.

As of 2015, there are 83.1 million Millennials in the United States, comprising a quarter of the total population and officially becoming the nation’s largest demographic segment. The need to accommodate these Millennials, among other demographics, in the country’s growing cities has spurred the most robust multifamily development cycle in nearly three decades, supported by pervasive absorption and high rent growth.

However, multifamily development remains heavily concentrated in the CBDs, with inventories now growing at nearly 4.0 times the pace of suburban markets, most recently exhibited in respective growth rates of 14.7 and 3.7 percent. This focus has put suburban investment—where approximately half the nation resides in comparison to urban and rural areas—on the sideline in many multifamily markets.

“These are mature economies with tremendous job opportunities for young workers,” says Stephen Jackson, Senior Vice President for JLL in San Francisco to GlobeSt.com. “Millennials want to live in these core markets but reality is driving them to communities outside of the city center, where rents are more affordable. As this happens, investors have a prime opportunity to buy in well-positioned, nearby suburban markets and benefit from what will likely be a long runway of demand.”

JLL Research takes a closer look at suburban multifamily markets to identify structural factors which are positioned to drive demand in an environment of lagging suburban momentum, compared to dynamic urban gains of recent years.

Transit

Multifamily-Transit

Affordability

Multifamily-Affordability

Demographics

Multifamily-Demographics

The Sunbelt cities offer areas of opportunity, including Florida, where Jubeen Vaghefi, International Director for JLL in Miami says, “jobs are back and rents are rising quickly in tier one markets like Miami and Fort Lauderdale. As this happens, investors and developers are showing renewed interest in our suburban migration corridors. They are looking at these areas in a new light, considering where they might place capital now to reap the greatest rewards in the long term.”

View these alternative strategies for multifamily investment

Read more on GlobeSt.comRenters Eye Suburbs; Investors Follow Them 

us for more info on Suburban multifamily trends

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